On May 11, the Federal Treasurer, Josh Frydenberg, is set to unveil the 2021/22 Federal Budget through his address to Parliament. Last year, due to the economic challenges posed by COVID-19, the budget announcement was postponed to October 2020. As a result, the 2021/22 budget is arriving only 7 months after a series of major measures were introduced. While traditionally, many people give the annual budget a quick glance, the substantial stimulus initiatives introduced to counter the impacts of COVID-19 and the impressive recovery of the economy so far will likely prompt more individuals to closely scrutinize the offerings within this upcoming budget.
Typically, the Government tends to release several budget-related announcements prior to the official budget announcement. However, this year, there have been very few, if any, such announcements so far. It is likely that more announcements will be made in the week leading up to the budget release.
But at Jade Truck Loans have had is the Treasures pre-budget speech, delivered to the Australian Chamber of Commerce and Industry on 29 April to digest. We’ve reviewed the speech and some of the commentary around the speech as well as a number of other key economic indicators to bring you this preview of the upcoming budget and what it could mean for your business.
Treasurer’s Pre-Budget Speech
The Treasurer's speech focused less on providing detailed information about specific measures and more on outlining the overall approach the Government would be taking. With a significant deficit resulting from the stimulus measures and considering the traditional aversion to deficits often associated with conservative governments, many were closely watching to see what strategy would be adopted.
The Treasurer emphasized that the budget would outline the upcoming stages of the Government's plan for economic recovery. Fortunately, he made it clear that the approach would not involve austerity measures to address the budget deficit. In simpler terms, there would be no immediate spending cuts aimed at restoring a budget surplus. Expectations are for a budget with substantial expenditures, but the specific areas, beneficiaries, and ways in which this spending will occur are yet to be unveiled. The Treasurer indicated that the upcoming phase of the recovery plan would continue to involve targeted and temporary measures, utilizing existing delivery mechanisms. Read more here.
Mr. Frydenberg provided a summary of the measures and policies that the Government had previously implemented, many of which are still in effect. Business owners will likely be aware that specific measures such as the Instant Asset Write-Off (IAWO) and temporary full expensing for eligible asset investments are applicable for eligible businesses throughout the 2021/22 financial year.
He stated that the budget would be focussing on jobs and further reducing the unemployment figures which currently sits at 5.6%. Previously the Government had targeted a sub 5% unemployment level but it appears they are now targeting a sub 4% figure. A figure not achieved in Australia since 2008.
However, he pointed out that the population growth was projected to be at its lowest levels in a century, largely due to the decline in migration caused by the pandemic. This situation could put pressure on the labor market. Additionally, he highlighted that another economic shift could result in lower wages and prices.
Strategy Focusing on Growth and Jobs
The Treasurer said the budget would adopt a two-stage approach. This would include boosting both the confidence of business and consumers to grow jobs.
From our perspective as a lender and your perspective as a business operator, we’ve highlighted these key take-outs from the Treasurer’s speech:
- Driving down costs to business by cutting red tape and green tape and locking in affordable and reliable energy.
- Investment in energy technologies.
- Further improvements in the skills, education and training space.
- Reforms to insolvency laws.
- More flexible IR system.
- Focus on the private sector and addressing repairing the economy and not the budget.
- Not increasing taxes
- Low and middle-income tax offset to continue for another year.
- Targeted supported measures.
While we await full detail on 11 May we will be staying across the lead-up statements from various ministers and the Prime Ministers in the next week.
Other Indicators
Several other noteworthy economic indicators should be highlighted. Just before the Treasurer's speech, the inflation figures for the March quarter were released. These figures indicate that inflation remains within the range of 1-1.3%, which is notably below the RBA's target range of 2-3% for considering any increase in the official cash rate. While not ideal for the overall economy, it does suggest that interest rates for lending will likely remain low. You can refer to the RBA's inflation rates for more information.
Another economic factor to consider is the labor shortages seen in certain sectors. Typically, in economic theory, low supply tends to lead to higher prices. Consequently, labor shortages may result in higher wages as businesses strive to attract employees.
Unfortunately, for those in the transport industry, petrol prices have experienced a significant increase in the quarter, attributed to the recovery in global oil prices.
Fortunately, we retain our cheap truck loan interest rate rates which you can utilise to compare the best deals. We’ll stay across the budget and economic scene to provide updates relevant to our lending sector and your business.
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