Should you really care about the Budget?

Posted On: Thursday, May 25th, 2017  In: Blog

Peter Vickers Chartered Accountant Lindfield

The Federal politicians have done what they had been elected to do. They prepared a budget that looks pleasing to the electorate. They have increased some taxes; extra 0.5% for Medicare levy and the levy on the evil banks. This is so they do not have to tackle the hard bit of reducing government expenses. They have handed out some goodies. Small business, which is now defined as those with a turnover of less than $10 million, can write off any plant that is purchased before 30 June 2018 and first homeowners will be able to do a shifty with their super but for only $30,000.

What have they missed in their thinking and what do you as ordinary people need to know about this?

It is called the MARKET. Even Stalin who was able to kill millions to get his way stumbled. The Soviet Union subsidised bread for the poor. The consumption of bread went up dramatically. The pig farmers found it was cheaper to feed their pigs bread rather than more expensive grain.

Thus if the first home owner can get their hands on an extra $30,000 they can then afford to pay that extra $30,000 for a new home and the prices thus go up by that extra $30,000.

So what about the levy on the big banks? There are four groups involved in a bank: employees, depositors, borrowers and shareholders. The employees will not take a salary cut. The other three will go elsewhere if they can get a better deal so the levy will be spread around all three. There is nowhere else that the money can come from. Remember that most of us are shareholders of the banks via our superannuation fund or the Future Fund. What the bank levy really is, is an indirect tax on the population like the GST. Hidden from direct view but still paid by ordinary Australians.

Speaking of markets, remember markets go up and then they go down. This applies to current interest rates and house prices. The first is likely to go up and the second to come down or at least stop going up for another ten years.

 

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