Where Governments from both sides of the political divide have always liked to claim that they can create jobs, we all know that’s a mistruth – it is businesses that create jobs. What Governments can do however is create an environment for Australian business that fosters job creation, and that is exactly what Josh Frydenberg tabled in yesterday’s Federal Budget.
Bastion notes that there were two main themes in the Budget;
- An extension of the bridge for economic support as we continue to navigate through the economic fallout of COVID-19
- The creation of a business-friendly job-making environment through a massive $27b tax break for 99% of Australian businesses (a ‘game changer’ to quote Josh Frydenberg).
Making jobs how? Quite simply by putting more money in the pockets of businesses a.k.a. employers;
- The JobMaker Plan i.e. programs and spending that is squarely aimed at supporting the hiring of younger individuals (ages 16-35)
- Immediate tax write-offs for businesses with annual turnover of up to $5 billion
- Loss carry-backs (i.e. going ‘back in time’ to offset losses in the 2019/20, 2020/21 and 2021/22 financial years against profits from the 2018/19 and later tax years.
- Additional tax breaks for small businesses with turnover of up to $50 million.
Other Budget highlights included a bringing forward of personal income tax cuts, and additional support for low income earners and pension recipients.
Click here for a snapshot summary of the key line-items from yesterdays’ Budget.
Bastion also notes that yesterday’s Budget was complemented quite nicely with the Reserve Bank of Australia’s (RBA) October meeting, the minutes of which indicate that the RBA is in full support of what the Government is endeavouring to achieve. The Morrison Government’s goal is to ultimately to bring unemployment back down below 6% (below 5% if RBA Governor Philip Lowe gets his way, a position which strongly hints that the RBA believes more stimulus – i.e. a rate cut which would mean even cheaper money – is needed to get Australia to where it needs to go).
In July 2020, Bastion had noted in a previous update that by pledging to keep the three-year bond rate at 0.25%, the Reserve Bank was indirectly helping keep government borrowing costs down. A smart move considering the mammoth stimulus measures that were introduced post-COVID, but which still need to be paid for. There is now some serious chitter-chatter amongst leading economists that the Reserve Bank’s focus on the yield curve could be pushed out to five years, or even longer.
So more money, and more easy credit – it was no wonder that markets responded in kind this morning with a buoyant budget-bounce. Further, it is likely that these additional stimulus measures will continue to underwrite markets and asset prices beyond the short term – and something that we will continue to monitor at Bastion.
As with many things in life, there are winners and there are losers.
As noted above, this is the right approach by the government and at the right time as we weather the COVID-induced economic storm. The Australian economy needs to focus on winning the COVID-19 battle.
However, with total debt levels being pushed beyond the record-breaking $1 trillion mark by 2024, we at Bastion can’t help but think of the ‘real’ bill that future generations will be left with, as it is unlikely that Australia will be inflating itself out of debt anytime soon.
Naomi Mee-Martino CFP® is a Financial Planner and Partner with Bastion Financial Group.
Bastion Financial Group specialises in investment management and holistic financial planning advice to high net worth families, professionals and business owners. We utilise asset allocation, proven research based methods, a focus on education and decades of experience to help clients minimise the risk and stress of creating and managing wealth. We are Certified Financial Planners and active members of the Financial Planning Association of Australia (FPA). Our Advisory team can be contacted on;
Naomi; naomi@bastionfinancialgroup.com.au or (08) 6225 5150 or 0413 917 698
David; david@bastionfinancialgroup.com.au or (08) 6225 5150 or 0407 770 782
Important information
This article has been prepared by Bastion Financial Group Pty Ltd., Authorised Representative(s) of Godfrey Pembroke Group (ABN 38 078 629 973), an Australian Financial Services Licensee, registered office at Level 2, 26 Brisbane Avenue, Barton ACT 2600.
Any advice in this document is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal financial, tax and legal advice prior to acting on this information.
Opinions constitute our judgement at the time of issue and are subject to change. No member of the Godfrey Pembroke Group, nor their employees or directors, gives any warranty of accuracy, nor accepts any responsibility for errors or omissions in this document.
