The Treasurer Scott Morrison has presented the Federal Budget 2017 proposals to Parliament last week. Grahame Evans, the Managing Director of GPS, has sent us a very interesting summary of the proposed measures entitled “The Loaves and Fishes” Budget Summary, as follows:

The “Loaves and Fishes” 2017 Federal Budget Summary

Prepared by Grahame Evans – Managing Director, GPS Wealth

When I sat down to listen to Scott Morrison last night, I had very little expectation of any worthwhile initiatives, considering the disappointments of the last few budgets. However, I must say I was pleasantly surprised. In a political and economic world of uncertainty, the Treasurer provided some visibility or glimpse that the real issues were in scope with the Government.

Our views, in summary, is that this budget provides economic hope, a recognition of areas needing addressing, some incentives for first home buyers and heading in the right direction back to a balanced budget by 2021.

We think it is a “Loaves and Fishes” budget which has taken what appeared to be, by myself and many other commentators, a basket which was pretty much empty and “fed the masses” with infrastructure delivery, jobs and economic growth, affordable housing for the not so fortunate, hope for the first homebuyer, strong reasons for retirees to downsize. Importantly, it appears the first steps have been taken that many thought were necessary, in the areas of foreign home ownership, management of bank practices and reductions in certain deductions for rental property without removing the need for negative gearing.

Additionally, in “feeding” the masses, the Treasurer has asked for an additional 0.5% Medicare levy to help to fund the Disability Scheme, he has asked for those who have used HELP to start paying back quicker (BTW great low cost finance for many people moving into the workforce).

Economic and Market Impacts – Neutral to Positive

Our Chairman of our Investment Committee, Emmanuel Calligeris has provided me with his snapshot of the effect on investment markets which overall will support banks and corporations.     “From a “what does this mean for my investment portfolio” point of view, the Federal Budget 2017 was neutral to positive overall. The beneficiaries include infrastructure companies however the budget was negative for the four major banks and Macquarie Bank shares provided they are not able to pass on the tax on bank liabilities of AUD 6 billion over the next 4 years.  The announcement of AUD 75 billion in new infrastructure spending saw the market react quickly – supporting CIMIC, Downer EDI, Worley Parsons and cement producer Adelaide Brighton. From a growth perspective, the budget is optimistic on its assumptions beyond 2018 (3% +) however the infrastructure spending will go a long way to help avert the growth void from the housing industry next year. Household spending is likely to remain subdued amidst low household income growth. Business investment and both State and Federal government spending should provide an offset.”

In what areas has the treasurer turned the “Water into wine” for mum and dad and SMSF investors? Not much from what we can see. Mostly minor. There was a combination of the not so good (water) and the good (wine) for investors in the budget. The economic impacts with infrastructure spending provide more “wine” with jobs and economic activity expected to drive increased economic growth and therefore market confidence. Subject to other major world events, we should continue to see the Australian market place remain relatively stable. So whilst not directly impacting our clients (unless you work in the construction and associated industries), it will underpin hopefully a continuation of a less volatile environment making planning a little more certain.

The Water:

The increase in the Medicare levy from 2% to 2.5% to assist with funding the National Disability Scheme as well as the government kicking in to fully fund Medicare is a mixed bag. Like the concept but what I pay for medical insurance now with the levy and private insurance is significantly disproportionate to my benefit. But I suppose I just need one major illness to unfortunately occur and I won’t be so concerned. The Wine:

For those of you who are “sandwiched”  between helping kids with first homes and parents into aged care, the former issue has some degree of help,  allowing first home buyers to salary sacrifice  (meaning contributing in before tax dollars) into super $15k per year and a maximum of $30k within current maximums which they will be able to draw out at some stage in the future for a home deposit. This applies to individuals, in other words both people in a domestic life partnership.

Overall the bank levy, the new dispute resolutions scheme and more accountability for executives in banks is a strong foundation, like most I can’t help think , this will be passed back to customers in some way in the future. (I was born a cynic!).

In summary, a budget which delivers some hope that the government knows what it is doing. Fingers crossed we can implement these initiatives well and deliver on these important “promises”.

Leave a Reply

Your email address will not be published. Required fields are marked *