Budget 2014

What are the predictions? And how does that affect your investments?

burrow said:

What are the predictions? And how does that affect your investments?

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Be nice if they get rid of Negative Gear, be good for my bank short position

I think half the leaks / though bubbles of Ponzi Joe wont eventuate.

Most of the cost cuts will impact on the poor and marginalised the most. Most benefits to the wealthy will remain unscathed.

This feels to me like the most talked about budget I can remember and one that will define the first term of the Abbott Government.

While tax increases and spending cuts have been leaked aplenty in the lead up, the following I wouldn't recommend in a single session.

http://www.news.com.au/finance/econ...et-drinking-game/story-fn84fgcm-1226915966657

ROE said:

Be nice if they get rid of Negative Gear, be good for my bank short position

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Haha. Don't hold your breath! It would stuff our property market, impact consumer confidence, reduce commencement and thus capital formation at a time when resources capex is deteriorating, damage GDP during a challenging transition period and increase unemployment by more than projected under current legislation. Not good if you want to get re-elected. It would also disenfranchise a key set of Liberal constituents. Introduction of land tax and neg gearing might be more viable when things are on a more even keel. Anyway, the Budget release will probably defy everything I just wrote and your bank stocks will hit the floor at the opening snap tomorrow.....err.

Do you run market neutral, bias long or let net market exposure do whatever depending on your view relative to what you think fair (however derived) happens to be in your portfolio?

Cheers

Hockey to swing the axe violently and close down ASADA, all at once bringing an end to the supplements saga without a verdict ever being handed down.

The Bombers to magically regain form and to go on and win the 2014 flag.

This has been a good budget.

For too long Australians have lived on handouts and freebies.

We now all take the pain to advance our nation.

Bludgers and whingers will protest.

gg

Essentially agree with gg above. Joe Hockey made a decent and coherent job of delivering the budget.

I do have some concern for young people under 25 not able to find a job, with the decision that it will be a six month stand down period before they can access even the miniscule Youth Allowance. Newstart is tough enough, but what will happen to those young people who cannot live with their parents and are going to have to support themselves whilst looking for a job with no financial assistance?

I absolutely understand and agree with the impetus to drive young people, anyone really, to seek work, but some are simply more employable than others, and the unemployment rate in some regional areas makes it extremely difficult for them.

Garpal Gumnut said:

This has been a good budget.gg

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I'm a Labor voter but debt is dumb. This mob of Liberals have already made the Labor bunch look like rank amateurs.

Fuel to cost more.

Julia said:

I do have some concern for young people under 25 not able to find a job, with the decision that it will be a six month stand down period before they can access even the miniscule Youth Allowance. Newstart is tough enough, but what will happen to those young people who cannot live with their parents and are going to have to support themselves whilst looking for a job with no financial assistance?

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According to this woman they missed the area of greater growth.

ACOSS chief executive Cassandra Goldie said if the government was serious about containing costs it should be talking about containing the costs that are growing the fastest rather than those growing the slowest.

"This is evidence that despite the current media focus, income support for those who are unemployed, people with disabilities and low-income families are not the primary drivers of budget expenditure growth," she said.

Newstart, family tax benefits and the disability support pension between them account for less than 3 per cent of the expected expenditure growth in the next 10 years. Hospitals, the National Disability Insurance Scheme, schools, childcare and parental leave and age pensions between them account for 50 per cent.

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Sigh, it was nice knowing you First Home Saver Account...all the while multi million dollar residences are exempt from the pension asset test..now that could really save billions.

De-regulation of Uni fees, in the UK that caused fees to sky-rocket, glad I've just finished Uni '..some course costs will fall', hilarious. Oh and interest rate increases on HECS debt, fantastic.

Work for the dole..was a total proven failure under Howard, it made no improvement to unemployment and just made the people more stressed and under more financial strain as they had to pay for travel, uniform and other away from home costs while 'working' for a pittance, less time on preparing and looking for a job.

6 months waiting period! Well, looks like youth homelessness will rise and probably the crime rate honestly...

$7 dollar co-payment, AMA and all medical fraternities are against this. Especially, if mostly likely, the Gov simply reduces the Medicare rebate by $7 and forces the GP's to bear the full anger of patients and put pressure on Doctors to keep bulk billing, losing out on income. Or do clinic/surgeries just collect the money for the Gov? Because I don't know how else this will be implemented.

All in all, a f*ck the young budget.

I do "get" what they seem to be trying to achieve and agree in principle - opportunity not hand outs.

But the 6 month waiting period for welfare for those under 30 seems unreasonable to me. Some people do fall on hard times through no fault of their own, and it's not as though the average person of that age would have significant savings built up. If they were going to target anyone then logically it would be the older generations, not the young, since those over (say) 50 ought to have some savings to fall back on.

I can see definite negatives in this move. Increased crime would be one, a reluctance to make long term commitments is another. Six months is a long time without an income and as the Treasurer himself admitted, we've got 700,000 more workers than we have jobs - so long as that remains then at any given time someone will be unemployed.

I'm also a bit uncertain about the infrastructure investment. A nice idea in principle, but there seems to be a huge focus on roads. Given that we're moving something like 95% (so I was told) of long distance freight (eg Brisbane to Melbourne) by road now, there would seem to be a pretty strong case for rail I'd think.

Adding another lane to a road isn't really a "nation building" project, it's just an incremental expansion of what we've already got. But something like high speed rail Melbourne - Sydney - Brisbane sure would be and has benefits for both freight and passengers. In due course it could be extended to Adelaide and possibly to Perth as well if there's a need.

One thing though, given everything that's in it I do wonder how much trouble there will be actually getting all this through the Senate? There would seem to be quite a few things likely to upset the other parties in a significant manner. This could get interesting.....

PinguPingu said:

All in all, a f*ck the young budget.

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Yes, I agree. I think they got the idea right (belt tightening) at the macro level, but they've really smacked the poor and the young and let everyone else off pretty lightly. Seriously, no dole for six months if you're under 30. If you're earning minimum wage, it's unlikely that you have six months worth of saving. I do think something needs to be done about universities because they seem to have become vocational factories but I don't know enough about it to know if the government's plan is the right path.

well we still spend billions on dud fighers and submarines, subsidise mining while all their profit is legally transferred O/S, and the one I was not expecting, the 6 months wait for below 30 to access minimum welfare;
in a way, tacit redistribution of wealth by increasing the break-in rates and literally robbing from the middle class/pensionner back to the poor homeless youth...by direct action ;
that one is a dumb one!
ah and yes with 2% levy above 180k we are back to more than 50% taxation rate which is a no go for me;
so I know the renovation job planned at home will be DIY and I will practise my guitar skill a lot in the next 3 years...
The funny thing is that when I point this, no one seems to believe people can volontarily reduce their work time and income.
Am I really the only one to have done and plan to do that?
You mostly reach these types of figure when owner of business/consultancy; not as an employee so the freedom is often there.
Anyway, next year my tax income bill will be lower.

PinguPingu said:

All in all, a f*ck the young budget.

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Without thinking any less of the sentiments regarding social security and educational elements for the young...

Budget tightening has a limited negative impact on the wider economy as they have, in my view, wisely chosen to defer the surplus date.

There are other places bearing tax burdens. Medicare levy hits from 22.5k proportionally. Although this is not progressive, the deficit levy of 2% hits on income >180k and is thus borne disproportionally by the wealthy.

Company tax rates for small business have been cut by 1.5%. These are the largest source of employment.

The MYEFO projects only a small increase in in the unemployment rate from about 5.5% to 5.75% for the next two years.

So I guess they are trying to create jobs via stimulating (small) industry, clamping down on aggressive tax practices (on large industry), trying to step on the brakes gently and hitting the wealthy disproportionately to pay for a budget hole. The harsh new initiatives on the dole could be seen as encouraging the workforce to take the new jobs expected to be created and not to be fussy about it. The university fees and support issue is going to ultimately encourage a privileged and reduce wealth mobility across generations. In the US system , though, you can still get student loans etc. I figure the same applies in Aust. Ultimately, those who use the educational facilities tend to benefit from them and it is arguable they should bear the cost of this. This tide on this is not going to turn back.

They are getting everyone to fund the medical benefits in some way and trying to correct what has been a higher than expected level of doctor visits, whilst at the same time adding spending to some areas.

They have also made it easier and more attractive to put money into super. This can be seen as a tax break for the rich but it is an encouragement to save for retirement and thus stave off a pension disaster later. There is also the downsizing of housing initiative which might assist those in the middle brackets to obtain the Age Pension. So there is a transfer to the old, from the young going on as well. But the indexation method for pensions have also been changed.

Their expenditure in infra will also likely increase productivity in the longer term and attract foreign capital and also allow domestic super funds to grab a hold of what is probably the best hedge for investors as they move to and beyond retirement.

They mentioned high Australian dollar a few times. Although the RBA has stopped talking it down, it looks like the Feds have decided to keep going.

The Australian Federal debt load is still at low/reasonable levels by world standards, so aims of aggressive tightening seems weird. Nominal GDP will likely be around 5-5.5% per annum. The debt load will erode without having to go into surplus. The claim is that they need to retain credibility in world markets of the foreign sourced capital might cease to be available to the banks primarily, but to elsewhere in the economy as well. This is not convincing. \\

Thanks RY, was hoping you'd post your usual balanced view....

RY for PM!

DeepState said:

Although this is not progressive, the deficit levy of 2% hits on income >180k and is thus borne disproportionally by the wealthy.

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A nice overview, and I would agree entirely if for not that paragraph. Its nots all that disproportional as on 7:30 report "structural changes are being made to the low income earners, whereas high income earners are only hit by temporary levies. If you're a 250,000 earner, you're paying about an extra $1400. If you're 24 and unemployed, you're losing $2500 a year' .. where you probably don't have the assets to help you along compared to a 180K+ earner

As for welfare- an effective means of giving back to society

The money that goes into welfare is reinvested in the economy - don't know many job seekers who chuck it all into a term deposit so he have some cash if he ever manages to get a job

Welfare goes straight back into discretionary spending, consumer staples, utilities...drinks yes but it all goes back in.

If welfare didn't exist and you had all these poor homeless people wandering the streets you can be sure that not only would crime sky rocket, but costs for services such as policing, healthcare and clean up would go through the roof.

the economy could fall by orders of magnitude due to the fact you no longer have enough consumers in the market. Welfare is not degenerate. Welfare supports your most unfortunate countrymen. There are not enough jobs for everyone.

Govs should be taking money away from the public servants (which they are, good sign) who are extremely overpaid for the little work they do and instead of recirculating money and thinking up meeting committees, names and clauses and birthing a vortex of bureaucratic hell.

This budget has hurt us all.

It is more honest than any of the Labor budgets over the last 6 years.

gg

Not a good budget for students. Uncapped course costs and HECS indexation to increase by 2 or 3%.

Aus is already saddled with a hell of a lot private debt, what happens when university courses start costing 20 or 30k pa and the average student has a 120 - 150k HECS debt?

$245M for school chaplains - waste
$1M for ballet students' boarding accommodation - waste
$5B on PPL - waste

I can see a massive increase in youth poverty by forcing the under 30s to wait 6 months for the dole. So someone that moved from a high unemployment area will be forced to return there and seek help from their families? We're heading towards the USA. Have a walk around Satna Monica beach where people with luggage sleep on the grass by day then roam the streets at night since they'll be moved along for vagrancy if caught sleeping there at night.

Seventy-one percent of the increase in welfare payments from 2007 to 2012 was in age pension payments, but this is pretty much off the agenda.

We have superannuation tax expenditures growing at roughly 12% a year, and most of the benefit goes tot eh wealthiest who will be just as likely to save for their retirement outside of super. There needs to be an annual limit of say 10K a year, that is accumulated each year so that as you get older and more likely to have excess income to save, you can make higher payments into super, without blowing out the budget like the present system is.

Then we have this - http://www.smh.com.au/comment/budget-pain-not-for-millionaires-who-pay-no-tax-20140512-zr9o3.html

The reason? They managed to cut their combined taxable incomes to $82. That’s right, $1.10 each.
Cutting taxable income that far doesn’t come cheap.

Forty-five of the uber millionaires claimed a total of $64.4 million for the “cost of managing their tax affairs”. That’s a staggering $1.4 million each. (As a point of comparison an entry-level H&R Block consultation costs $49.)


They're probably harder to target than the poor and unemployed, but letting this kind of dodgy tax minimisation to continue just sends to wrong message to us PAYG plebs who really can't avoid the tax man.