The Federal Budget has dominated the headlines for weeks, and while it generates plenty of interest, it doesn’t impact investors much.
I’ve long been saying that like interest rates, the Budget is worth observing, but it’s not something to obsess over.
While the wash-up is being debated by commentators, with polls revealing voter sentiment, allow me to share with you my three takeaways of relevance to Australian investors.
- Do as I say, not as I do
Federal Treasurer, Jim Chalmers, certainly doesn’t follow Bulletproof Investing Tip No.3:
Spend on what you need, not what you want
Identify all the things you spend money on (expenses) and categorise them as either a ‘need’ or a ‘want’. If the expenses exceed your income, it’s time to get rid of some of the ‘wants’. If you’re struggling, cancel all your cards and order new ones; this will help kick-start the process.
We certainly can’t run our households the way the Government uses our taxes.
At the risk of repeating myself, I would have liked to have seen the Government make some hard decisions around reigning in spending.
We are being asked to reign in our spending amid high inflation and interest rates.
The Government, on the other hand, is poised to spend 6 per cent more in the next year and 47 per cent more than it was before the pandemic.
All the while revenues will only increase 1 per cent on last year, and revenues are up just 38 per cent on what they were pre-pandemic.
All signs point to the Government having to push up the age eligibility of the pension and include our own homes in the means test at some point in the future.
- Everyone is a winner
As we heard from the Treasurer, every Australian will get a pay rise through reduced taxes.
This will increase the disposable income for the average Australian worker by $1888 (or $36 per week).
This is equivalent to a 0.3 per cent drop in interest rates on the average home loan.
In addition, every Australian household will receive a $300 electricity discount.
This comes on top of the $1,000 and $400 that households in Queensland and Western Australia will be afforded respectively.
One million businesses will receive a $350 electricity discount, while those on Rent Assistance will receive an extra $10 per week.
Further to this, anyone with a HECS debt will see their HECS debt increase by just 3.2 per cent versus the 7.1 per cent indexation that would have applied.
It was a generous budget in almost all respects for all the 13.6 million working Australians.
- Migration
Net overseas migration will be capped at 260,000 people this year, down from 500,000 people in the past 12 months.
It’s still up on the 230,000 people we welcomed to the country annually pre-pandemic.
When you throw in our natural increase (births over deaths) of 125,000 you get a total population growth of 385,000.
To house this many people we need to be building 190,000 homes. But instead, we’re building 150,000, so we still have a way to go before we see the end of the housing crisis.
The Government did contribute a whopping $1.9 billion toward new housing which will have a positive impact, but it will take time.
Again, I reiterate my opening statements, while there is no need to obsess over the Budget, we would do well to observe it and make our investment decisions accordingly.
For me, I need to take matters into my own hands when it comes to having an income in retirement.
Fortunately, there is a huge opportunity to do that by buying land in areas where the population is growing and disposable income is increasing.
