With state and Federal 2021/22 budgets delivered in May-June, Governments deliver a half-yearly budget update at the calendar end the year. These updates are essentially a report card on what has occurred, commentary on the effects of changed economic conditions and reporting on any adjustments which may be necessary to the figures included in the budget.
While not having a direct effect on interest rates on loans such as equipment finance the half-yearly budget update can provide insights to businesses as to opportunities ahead and the outlook for the economy from the Government’s perspective.
On Thursday 17 December, Josh Frydenberg, Federal Treasurer, released the Mid-Year Economic and Fiscal Outlook and Matt Kean, the relatively new NSW Treasurer, also released that state’s half-yearly budget update to NSW Parliament. This all happening in the same week as the Omicron cases started their surge across multiple states and territories.
The updates and the potential complications for the economy from Omicron together present a lot of information for business owners to get across. To simplify that process, we have selected a number of key points and comments from the RBA Governor in relation to these updates for our customers to consider.
MYEFO Key Points
MYEFO is a requirement under the Charter of Budget Honesty and is intended as somewhat of an accountability process for the government of the day. The complete MYEFO document runs to over 400 pages for those keen to get into the detail.
For those seeking a quick update on the update, we have extracted a number of key points and included comments made by the Treasurer in the lead-up to the announcement.
- The Treasurer described the current economic situation for 2022 as being ‘primed for lift-off’.
- The rebounding of the economy is expected to be maintained and continue despite the emergence of the Omicron variant. The details around this variant which appear to be emerging from overseas studies suggest it will not hold back the economic recovery.
- Unemployment is expected to continue falling.
- Restrictions should continue to be eased.
- Labour shortages in a number of industries should be addressed with returning international students and skilled workers.
- Unemployment outlook: 4.5% during 2022; 4.25% by the June quarter in 2023.
- Growth in real GDP for 2021/21 expected to be 3.75%. In 2022/23 to post 3.5%
- Labour shortages being addressed with targeted measures
From the equipment finance perspective, the indicators which the RBA has stated would trigger a rise in the official cash rate are inflation and unemployment so they are the figures to watch.
Addressing labour shortages may present a particularly positive sign for businesses in some industries especially agriculture and hospitality.
Comments from Governor of RBA
Earlier in December the RBA Board announced its monthly rate decision and kept the official cash rate on hold at 0.1%. On 17 December, the day MYEFO was released, Dr Philip Lowe, Governor of the RBA was delivering an address to business people in NSW.
Comments made by Dr Lowe on that day related to the potential effects of Omicron on the economy. He acknowledged the possible risk of Omicron but expected the economic rebound in Australia to continue. Reopening, easing restrictions and high vaccination rates are seen as underpinning the continued recovery in Australia.
On the specific topic of interest rates, Dr Lowe was consistent with recent RBA decisions. Repeating that the Board was waiting for 2-3% sustained inflation and unemployment at lower than existing levels in order for them to consider a rate rise. He stated that these were not expected to be realised in 2022.
Good news for those considering investing in equipment over the next year.
NSW Treasurer Half-Yearly Budget Update
The NSW state budget update was presented to NSW Parliament by Treasurer Matt Kean on 17 December with the significant impact caused by the winter lockdowns on the budget clearly evident.
Treasurer Kean expects the jobs lost during the Delta lockdown to be recovered early in the new year and the bounce back to continue. For those interested in further information on the NSW Budget position, possibly on infrastructure investment, the documents are available at NSW Treasury.
Equipment Finance Update
The significance of the half-year budget updates for businesses can be to provide certainty and direction moving forward. For those not able to operate to full extent due to staff shortages, the outlook and measures to address these problems should be welcomed.
If announcements in the half-yearly budget updates have provided you with the confidence to move on equipment investment decisions, speak with us about finance quotes. We have a comprehensive portfolio of finance products at cheap interest rates available to finance a wide range of equipment.
Final reminder – temporary full expensing is available for eligible asset acquisitions through to June 2023. Chattel Mortgage is considered the most suitable form of finance to appreciate the benefits of this accelerated asset depreciation measure.
Contact Jade Equipment Finance on 1300 000 003 to discuss cheap interest rate equipment finance.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.