Australian Budget Considerations

Posted: May 14, 2014 in Uncategorized

Well, finally the Budget is out,

It has been painful, but not horrendous.

If you had 100 bullets 70 have hit the “poor and needy” and 30 the “rich and wealthy”.

It seems that the priority of the Budget was to hit the ones that “cannot/ do not want to contribute” to economic growth of Australia, sparing the one that can.

It is a bit Macchiavellian, but – with Australian growth now slowing to a crawl – the Government did not have the force (and maybe is better) to hit something like tax deductions for investment properties.

Logically things could have been better – they could have looked at the Chinese and decrease the tax deductions for the second, third etc investment property and do a few other things.

Even the tax levy for the rich over $180,000 is a bit low (low income earner get a much bigger tax burden).

But to discuss this is not my point. More to highlight some tricks

-The fuel tax increase has a dual benefit for the Government. Logically it increases the Government coffers, but also stokes inflation. But a small hike in inflation gives a big help to decrease the Deficit (it is all about the money transmission effect – a bit beyond the scope of this blog)

-The reduction of Company Tax is a fake (company with less than $5 million earning will receive more dividend but less franking – so net/net a zero event – company with more than 5 million earning the tax reduction will be offset by the parental leave scheme…so same level of dividend, but less franking – worse off)

– The increase of pension age to 70 is common sense. but a lot of persons will not be healthy enough (or able to find a suitable age-related job) to work till the age. If you are in the mid 40s and want still to retire at 65 you will have to find another $100,000 in 20 years to get a same level pension for your money.

The spend in infrastructure and healthcare is good – but to be seen.

As to be seen what will be approved or not in July as the Liberal do not have a clear majority and Labor already promised a hostile position.

All in all – nothing exceptionally surprising or clever. I wish there was a Third Party (as Labor is not better)


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