Australian Budget: The squeeze is on!

Posted: May 27, 2014 in Uncategorized

The Australian Budget (if approved) will put real pressure on the average Australian.

-Wage growth has slowed (now is in line, or even laggard, to inflation

-Employment growth has slowed down

-Real estate is slowing down (the last rate cut was 10 month ago and so the effects are gone)

-The consumer sentiment is at 20 years low – a level just seen in the deep financial market crisis (2001 and 2008)

So what is the outcome in this scenario?

It is probable that the RBA will cut again the interest rates.

The consumer dependant sector (consumer discretionary the  most – but mainly all sector dependant on the consumer willingness to spend…so also banks (most of the income is derived by new loans), Telecom (people will try to reduce their bills).

As a personal comment: I do understand the need of reigning in the expenses – but there are a few points

-We have still one of the best financial situation in the world (US, Europe and everyone else, practically)

-We are at the end of the misused mining boom and searching on how to reinvent ourselves

It was actually not a smart idea to do a fiscal tightening of this level now.

But we will have to see July to understand what the real legislated Budget will be. There will be many battles!


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