What do you want from tomorrow's budget?

[drsmith]

Ie 1.28^(1/4) - 1 ~ 6.4%.

6.36592% according to ye old Casio fx-82 scientific calculator.

 

[c-unit]

6.36592% according to ye old Casio fx-82 scientific calculator.

Yup. And the fact that the government are basing their entire revenue streams on an annual GDP growth rate of 6.4% (or 6.36592% to be precise as you stated) is absurd. Particularly given they are trying to rip the **** out of the mining industry which is probably the key driver of growth in this country. Not to mention they've glamoured up the expense accounts through removing the ETS costs and haven't included the costs of the NBN in their numbers.

So let's summarise:

- Not including ETS in the budget, not including the NBN in the budget, a surplus won't come for three years, and that is assuming best possible case scenario of tax receipts from the mining sector combined with a 6.4% annual GDP growth rate.

If the government were a corporation, they would be investigated by ASIC.

 

[Whiskers]

According to the age, the revenue figures assume GDP growth of 28% in the next 4 years. That is 6.4% per year

As much as Kevin wants us to be, we aren't China....

Yes, more like a bit over 4% compounded annually.

Sorry? 28% GDP growth over four years is 6.4% per year (when you consider compounding)

Ie 1.28^(1/4) - 1 ~ 6.4%.

Perhaps I read the 28% GDP growth over 4 years figure incorrectly, but if that is what they are saying, then they are assuming 6.4% growth annually.

Maybe we're not talking about the same thing, but the budget papers estimate this year is 2% and forecsat 3.25% for 2011 and 4%, by 2012, given that rate of growth an average a bit over 4% by 2014 sounds reasonable to me.

If I've missed something I'm happy to be corrected or maybe post the age article and I'll see what they're talking about.

 

[c-unit]

Yep nevermind Whiskers, I checked the article and the growth rate used by the author was nominal, not real. Seemed a little fishy... I should have checked the figures myself before going on my rant.

However I still stand by my comments regarding the optimism in the budget. With those real growth rates, they are effectively assuming a boom similar to that from 2003 - 2007. We shouldn't be expecting these kind of numbers after the proposed resource tax.

The greatest issue with the resources super tax is that the rate of return used to calculate the miners profits (ie to see if they are greater than 6%) and qualify as "super" is based on the carrying cost of the miners' existing asset base, which will smash BHP and RIO who have comparitively old equipment and thus low carrying costs. I think Rudd and Swan have really messed up here. They just don't understand these things. Given that Swan himself doesn't understand basic financial concepts like risk premiums, it is no wonder so many are questioning the validity of his budget.

Sorry to go off topic, but I just get so upset when the government tinkers with things they don't understand. Particularly when they tinker with it to cover up their blatant mistakes and wastage of past policies. These clowns couldn't even run a lemonade stall at the local fair. Swan isn't fit to shine Twiggy's shoes. I'm ashamed I voted for them, although in my defense I was 18 and just did what everyone else was doing.

 

[Whiskers]

Yep nevermind Whiskers, I checked the article and the growth rate used by the author was nominal, not real. Seemed a little fishy... I should have checked the figures myself before going on my rant.

Ok.

However I still stand by my comments regarding the optimism in the budget. With those real growth rates, they are effectively assuming a boom similar to that from 2003 - 2007. We shouldn't be expecting these kind of numbers after the proposed resource tax.

The greatest issue with the resources super tax is that the rate of return used to calculate the miners profits (ie to see if they are greater than 6%) and qualify as "super" is based on the carrying cost of the miners' existing asset base, which will smash BHP and RIO who have comparitively old equipment and thus low carrying costs.

I think the main reason for the loud whingeing and project delays atm is that they will have to revisit and totally re-work their budgets and project analysis. That will be a significant job in itself and pain in the @rse

That's because few like change, let alone substantial change.

I have no doubt the financial and operational expense (carry cost) of BHP and RIO are low at present, but given the most credible article I've seen by David Buckingham, former head of the Minerals Council, http://www.businessspectator.com.au/...cument&src=sph
it may only hurt them if they do the same as they've done before.(See the new net tax scale in the article)

I'm still trying to get my head around how the dynamics will change as a result of the tax, but I'm thinking it may make smaller projects/companies more profitable sooner and reduce the likelyhood of multinational corporations cherry picking them off at low market prices. I'm not sure it will hurt our mining industry as bad as some fear.

Given increased decuctions/rebates and the proposed net tax rates, I expect it to be easier for smaller companies to get a good start and probably shouldn't hurt the big miners too much if they adjust their budgets.

But in the meantime I'm glad I'm not holding BHP or RIO atm, just a couple of smaller goldies.