Pre-Budget Treasurer Speech: SummaryWhile dubbed the traditional pre-budget speech, the speech is officially entitled Fiscal Strategy Update and overviewed the Government’s next phases in the economic recovery plan for the country following the COVID-19 recession. The Treasurer provided background by noting the economy’s position prior to the pandemic, especially how the budget was back in balance and spending controlled. He went through key points of the Government’s response to the COVID-19 crisis, quoting forecast and real GDP figures and the unemployment rate at various time points. He noted the measures taken by the Government in stimulus and support – around $314 billion. Support which has been funded through borrowing by the Government. Despite the support provided and the cushioning that support created, the Treasurer acknowledged there would be long term effects to both the economy and the budget position. He discussed the effect of the expected slow-down in population growth with the decline in migration as a result of the international travel situation and the impact this is and will have on the economy in many ways. In outlining the fiscal strategy (upcoming budget) the emphasis was clearly stated as being on jobs and growth and would be a two stage approach. He said it would be unrealistic to target a budget surplus, saying the 2021/22 budget would blend elements of the pre-COVID fiscal strategy with new elements to address the current realities. The first phase focuses on boosting both business and consumer confidence and promoting growth and jobs. He said this would be achieved through a number measures and specifically mentioned was a continuation of provision of targeted, proportionate, temporary support including through tax measures to promote private sector investment and jobs. Mention was given to securing reliable and affordable energy. The Treasurer is looking to a reduced level of unemployment, some surmise even in the sub 5% range, before moving into Phase 2 of the fiscal strategy. While no specifics were detailed, the key area of focus in this phase will be continued focus on jobs and growth. Reveals will likely continue to be unveiled in the final days before 11 May and we will be across the detail.
Other ConsiderationsFrom our point of view as a lender, Business Finance looks to the budget for benefits and advantages for our customers to particularly invest in new assets. But for indicators around what might happen with interest rates, the focus is on other indicators and stats which are revealed on a regular basis. In particular, at the moment are the inflation and unemployment figures. The RBA has stated that it is looking towards inflation in the 2-3% range and unemployment much lower than the current level before considering lifting interest rates. The March quarter inflation figures were announced in late April and show that inflation is still in the mid 1% range. Well off the RBA’s target. Slow wages growth in Australia has long been flagged as a concern but there is a new trend emerging which may have an effect in that space. Many employers have reported difficulties in filling job vacancies, with labour shortages in many industries as a result of international border closures in particular. According to economic theory, when supply is limited, prices increases. So will wages need to be increased to attract staff to these jobs? If so, will any growth only be in certain sectors and will it be sustained over a significant time period? The pandemic has certainly thrown up multiple issues for policymakers to take into account and for businesses to consider when taking on finance. Contact 1300 000 033 to discuss how we can tailor a lending package to meet your requirements DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.
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