Before we jump into the Budget, a big congratulations to Lili Hong from the Future Gen Team who is a Finalist in the FPA Awards.
With Future Gen, Lili has come from completing her professional year to being an Adviser in her own right and overseeing a significant client base. It’s a tremendous result and is a credit to Lili’s dedication and work ethic.
This Budget is more focused on what it says rather than what it does.
The Budget presents a significant long-term challenge with yet another ramp up in structural spending (reflecting increasing demands on the public sector) with little in the way of major spending offsets and a continuing reliance on rising revenue to at least stop the situation from worsening. There are significant deficits that are rising for the next decade at least and that is before anything happens out of the left field (another pandemic, a conflict closer to home, the commodity boom ending). This Budget is vulnerable to say the least.
At some point tough decisions are required to cap spending growth or further raise tax revenue, hopefully in a way that does not crimp productivity growth. This remains an issue going forward.
Key points to note
National Disability Insurance Scheme (NDIS) is now running as the second most expensive government program after funding for the aged pension. The spending on NDIS is greater than Medicare, Defence, State Hospitals and the blowout to $50 billion per annum seems unchecked. Allowed to continue and the gap between spending and revenue is just going to get bigger and the interest bill the government is paying (capitalising) will only get larger.
Extension of the downsizer scheme to now include people who sell their home from age 55, will provide some incentive to people to sell their family home and put up to $600,000 into superannuation.
Government invites super funds to participate in the Housing Australia Future Fund to assist with building 40,000 more homes. The details are yet to be released, but it seems it is predicated on the government topping up the gap between subsidised rents and market rents to superannuation investors.
Once again, we will continue to watch and comment as more facts come to light. We hope this article has prompted your thinking. If you would like to know more, feel free to reach out to us.