Want to know the stories behind the numbers? We had Chris talk us through the latest market activity and what’s on the horizon:
Declaring that “Australia is coming back”, Treasurer Josh Frydenberg outlined significant spending in the Government’s second ‘pandemic Budget’ on 11 May 2021.
With billions promised across a range of measures, the Government is also hoping Australians will spend, with $7.8 billion in income tax cuts promised for individuals, and $16 billion in tax cuts to small and medium businesses by 2023-24.
While the deficit will reach $161 billion this year, Mr Frydenberg believes there is much cause for optimism.
“With more Australians back at work, this year’s deficit is $52.7 billion lower than was expected just over 6 months ago in last year’s Budget,” he said.
“Treasury feared unemployment could reach 15 per cent and the economy contract by more than 20 per cent. This would have meant 2 million Australians unemployed…today the reality is very different. Ahead of any major advanced economy, Australia has seen employment go above its pre‑pandemic levels.”
The Government’s positive outlook is shared by the Reserve Bank of Australia (RBA), which kept the cash rate on hold at its May meeting, a week before the Budget. RBA Governor Philip Lowe said the outlook is for strong growth both this year and next. “The economic recovery in Australia has been stronger than expected and is forecast to continue,” he said.
Lowe added that the RBA has revised its central scenario for GDP growth, with growth of 4¾ per cent expected over 2021 and 3½ per cent over 2022 thanks to a projected increase in business investment and household spending.
With our diversified investment objectives linked to CPI, or the Consumer Price Index, you’ve probably heard us talk about inflation before – but you may not have heard about reflation.
Reflation is defined as a monetary policy designed to expand output, stimulate spending, and curb the effects of deflation, which often occurs after a period of economic uncertainty or a recession. Reflation policies can include lowering interest rates, reducing taxes, and spending on large projects – for example, many of the announcements made in the 2021 Budget.