Starting with Besa Deda, the Chief Economist of the St. George Bank. She reviewed the current global and Australian economic climate. One of the first and most interesting lines that she reviewed was actually a historical cash flow of the Australian GDP dating back, believe it or not, to the Gold Rush in 1870. On the same slide it projected forward the cash flow to 2070. We’re talking about a 200 year projection here. 144 year look in the rear view mirror of our financial history as a country, and a 66 year projection into our economic future. It was a pretty interesting slide to look at. It shows that the powers that be here in our government, love them or hate them, have a genuine, really deep understanding of the purpose of looking back into financial history, looking forward into what’s likely to happen, and planning so that the actions needed today are clear.
It’s from these that budgets are born. The Chief Economist spoke of residential building approval being on the rise, particularly here in New South Wales, and the ripple effect onto the construction market rising as well. This was all directly in correlation with both the current and predicted population growth, particularly here in New South Wales where we make up more than 50% of the overall Australian population growth predicted.
Retail spending on the recovery
Last but not least, she spoke about retail spending being on the recovery and that likely to project into the future with unemployment being dramatically down and continuing to drop into the future. All of this is likely to lead the RBA Bank to continue to hold interest rates until at least February next year, when an increase is predicted. But all of this will make sure that this stays in line with the current trends. Well worth checking out more of those slides if you get the chance.
The Three biggest expenditures of the Australian Government
Then Ross Greenwood got up... And of course being the Channel 9 finance guy, I’m sure you all know who I’m talking about. He spoke quite candidly about politics and the budget and the impact this is likely to have on small business. Let me share a little bit about what he said. In reviewing the budget, he commented on the fact that the three biggest expenditures of the Australian government is welfare, and that includes the age pension, health and education. These are the three big spenders we have. And being the top spends, this is also where the big cuts came from so that we can overcome that budget deficit. The fuel excise was also discussed, and how we’re already paying around a 40 cents in excise now. And that this will be increased by about 15 cents, almost all of which has been promised to roads and transport infrastructure for the future growth, again, particularly here in New South Wales to keep up with all of those economic trends that I’ve just discussed.
Australia to be the biggest spending nation on the planet!
Economists agree that we are on a rapid trajectory to a spending spree. In fact, we were literally going to be the biggest spending nation on the planet. If we didn’t do something quick, we’re going to have an awful lot of issues on our hands, far bigger than what this budget is going to cause. To top that off, we were already the third largest on the list of debtors on the planet, meaning we owed pretty much more than everyone else put together by two.
The good news is for small business owners amongst all of this, is that the reduction from the small business tax is about 1.5%. It may seem like a small amount, but if you go back to your tax records, you’ll see just how much that’s going to add up. Last but not least, all of this is to ensure globally in-line tax rate, particularly for business so that we can up our competitiveness with businesses we compete with around the globe. The only drawback is the change in personal income tax for those business owners who are earning more than 180,000 dollars in personal income. But, how to say this correctly? A good discussion with a good accountant should help with that.
The Federal Budget is just a proposal
Of course the Budget right now is simply a proposal... It’s just a blueprint of what they’re hoping to do for our financial future. This still needs to be sold, quite literally pitched to the public, and they’re working very hard to do that. You’ll see lots more interviews with Joe Hockey coming up. It’s not just the public they need to sell it to though, it’s the Senate. The reality is some of those key points, particularly those the media are picking up on that are hitting the low income families, will be stopped at the Senate. They just won’t let that get though and the current government doesn't have the power to push it all the way without making some concessions.
Reality is right now, we’re just whistling in the wind. The real financial difference is still to come to see what actually makes it through to becoming a policy. Watch this space.
About the Author
Ben Fewtrell is a sought-after Business Coach, Keynote Speaker and trainer who has featured in Virgin’s Inflight Magazine and Entertainment Portal, SKY Business and “Secrets of Top Business Builders Exposed”. He is also the host of the popular Business Brain Food Podcast where he interviews leading experts on anything and everything business.