Another Federal Budget is down, and the Government will now await its reception among voters. That reception will impact on the many things, including interest rates.
Here’s a very quick Budget Summary
- Families with small children are receiving increased subsidies, particularly in child care rebates.
- Small business is getting tax breaks of up to 5% and immediate tax deductions for items purchased under $20K. The Government is also making it easier for start-up companies giving deductions to items that previously needed to wait 12 months to claim.
- Rural Australia, National Security and Defence are also big winners in this budget with the Government focusing on securing our national interests and increasing national funding to these areas.
- Double dippers into the maternity leave schemes and stay-at-home parents. The government is really encouraging families to return to work as soon as possible.
- Multinationals are in the firing line with heavy penalties for tax avoidance.
- Anti-vaccinators: family subsidies will be stopped if children’s vaccines are not current.
- Online consumers are about to be slugged with the GST to be introduced to most digital products.
This Budget has received a relatively positive reception from some financial watchers. But consumers will make their feelings known over the coming weeks and months.
We know that last year’s Budget reception wasn’t what the Government wanted. And that backlash did nothing to lift confidence levels in the economy.
And that’s why the Government hopes this year’s Budget receives a better reaction.
Why does that matter?
Without a lift in confidence, the Government will not meet the GDP forecast that underpins much of the Budget.
It is already assuming weaker iron ore prices, but it needs consumer spending to stay solid despite weak income growth.
So, where would that leave interest rates?
In the foreseeable future, economists are not tipping a rate rise. Some are factoring in another cut from the Reserve Bank.
The Budget would need to hit its key forecast marks before there is an expected increase in interest rates. Confidence has to return before rates will rise.