Posts Tagged ‘Australian Budget’

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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Soon we will have the budget we have to have. As it is the first year in Government, the Government will “dish out” all the pain – hoping that the electorate will forget by the time we go to the next election.

What is true is that the issue has been the previous Government as the increase in spending was about 7% (4.5% in real term) in a falling revenue scenario (3.6%). Spending has been 1.8%pa more than average and revenues 0.8% less than average. Hence the issue.

Where will be the most likely hit? Please be aware that from July the Government will be in minority in the Senate …so not is all that clear

– Reduce Federal staffing level (5-6% of spend)

-Reduce duplication between Federal and State Government departments (specially in health, education, workplace)

-Tighter mean testing (childcare, Age Care, Disability Support, 

-Increase user pay (specially for high income earner) specially in the health sector

-Online system deliveries (Medicare, Centrelink)

-Pension age gradual push to 70yo

-Broadening the GST base and decreasing the Internet purchases  $1,000 GST free level

-Taxation of product related to alcohol, tobacco and obesity

-Abolition of Mineral Resources Rent Tax (MMRT) and Carbon tax and relative department

-Privatisation (Medibank, but maybe also Australia Post)

What is in it for the share market?

Negative for Healthcare/Pathology 

Positive for Infrastructure 

Positive for Australian Retailers

Negative for Supermarkets and food manufacturers

Positive for miners and energy