Although we are only a week into October, we’ve already seen the Reserve Bank decided to leave rates on hold, the leader of the “free world” contract COVID-19, and Federal Budget was released. It’s fair to say that the budget lived up to expectations in terms of big numbers, with a large stimulus, ballooning deficit, and eye watering debt projections.
Some will say that a budget of these proportions and magnitude was unnecessary and avoidable if different health and policy paths were taken. Given the current state of play, it’s impossible to argue that this level of stimulus isn’t required to kick-start the economic recovery and get us back to where we were.
Some of the key announcements made include:
Super - To help members avoid paying additional fees for multiple super accounts, employers will no longer create default super accounts when an employee joins their company. By July 2021, MySuper products will need to do an annual performance test and notify members each year if their fund underperformed. The Government will also release an online comparison tool called YourSuper that will help members compare the fees and returns for super funds.
Age Pension and welfare recipients - People who are currently receiving certain eligible income support payments and concession cards will receive two additional payments of $250, to be paid in December 2020 and March 2021.
Creating jobs - The Government intends to grow the economy by creating job opportunities in sectors such as manufacturing, infrastructure, medicine, recycling, food, defence, farming and tourism.
Health services - To help look after vulnerable Australians, there will be additional funding for the National Disability Insurance Scheme, mental health and suicide prevention, and the Pharmaceutical Benefit Scheme.
Tax cuts - The Government will bring forward income tax cuts for most income brackets that were scheduled for 2022. More specifically, the top threshold of the 19% tax rate will increase from $37,000 to $45,000, whilst the top threshold for the 32.5% tax rate will increase from $90,000 to $120,000. This is all about putting more money in the hands of households as JobKeeper and JobSeeker programs taper off.
The key assumption for this budget is that a vaccine will be widely available and distributed by middle of 2021. The unknowns ahead include things like state government responses to virus waves, continued state border closures, foreign border closure, effectiveness of virus treatments and vaccines (including willingness to take), continued work from home arrangements, continued bank repayment holidays, how many of those on JobKeeper will retain their jobs.
Lastly, we expect to see heightened volatility (swings up and down) on share markets – especially as we approach the US election. Always happy to discuss your personal situation should you have any questions or queries about your own situation.
Synergy Private Wealth
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