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The Federal Government’s 2021 Budget is a complex mixture of economic measures that continues its response to the implications of the Covid pandemic and also addresses some of the major social issues/needs that have been recently exposed and agitated.
As with all Budgets, what goes out is funded by what “income” comes in and increases in debt. In this Budget this is clearly the Government’s strategy for today, tomorrow is another problem.
That being said, the Government’s expenditure measures are reliant on a number of key economic contributors:
Greater cooperation by State Governments with regard to Covid management and border closures continues to be an economic threat.
The key message from the Budget papers and the Treasurer’s speech, is that the Government is prepared to “manage” substantial and ongoing budget deficit and the present government debt by fostering improvement in economic business prosperity, utilising the prevailing low interest rates and limiting ongoing economic disruption caused by Covid.
Whereas politically, the current Budget strategy is “out of character” for the Coalition, the economic flexibility highlighted in the budget should provide business with some confidence that the Government understands the broader issues facing the Country and shows it intends to manage the economy carefully (albeit with a possible eye on an election later in the year).
There are arguably some underlying issues with the Government’s economic management:
From a taxation perspective, the Budget principal measures include:
The proposed administration rules to manage the ATO’s small business debt management practices is well intentioned but misses the key issues of dealing with the ATO more generally.
There are a mixture of personal measures, taxation and more general measures that have a broader social context:
As regards superannuation, other than the elimination of the $450 monthly threshold, the increase in the superannuation contribution to 10% was not mentioned, there are some other measures that will impact investment in housing:
The Budget will not please everyone but has enough to satisfy the economic and social imperatives for the current time, pity help the next generation.
If you have any questions or concerns about the proposals from the Federal budget announcements, please contact your Ulton Advisor to discuss.
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