Tag: Budget

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Federal Budget Breakdown

The 2022 October Federal Budget has been announced. Here’s how the Goldfields and mining are affected.

 

The migration cap will increase 35,000 persons to 195,000 people in 2022-23. At least 90% of these 35,000 will be for skilled migrants and more than 25% will be targeted to regional areas.

This will ease labour shortages and include accelerating visa processing. Student and secondary training visa holders will have their work restrictions relaxed until 30 June 2023.

 

In an effort to transform regional industries to net zero by 2025, the Government will establish a $1.9B Powering the Regions Fund to transform Australia into a renewable energy superpower. $1.5B will be allocated to the Pilbara Region to support mining, mineral processing, and local manufacturing, and provide investment in hydrogen and renewable energy projects.

 

$500M Driving the Nation Fund will reduce transport emissions by installing electric charging infrastructure at 117 highway sites and hydrogen highways for key freight routes. Electric cars will be exempt from fringe benefits tax (FBT) and the 5% import tariff.

$350.0M will be dedicated to seal the Tanami Road between Norther Western Australia and the Northern Territory, $400M for the Alice Springs to Halls Creek Corridor upgrade and $125M for electric bus charging in Perth.

 

$757.7M will be allocated to improving mobile and broadband connectivity in regional Australia. $7.4B will be invested to support regional development across Australia. The Growing Regions Program will support community groups, fund local projects such as libraries and regional airport upgrades. The Government will also dedicate $1.4B for local community, sport and infrastructure projects across Australia.

 

$143.3M will be provided over 4 years to support access to healthcare in rural and regional areas by investing in primary care services, training, workforce incentives and trials for innovative models of care.

 

A $50.5M Critical Minerals Research and Development Fund will invest in lithium, cobalt, manganese, titanium and rare earths to meet growing demands for batteries, electric vehicles and clean technology.

 

Multinational corporations will pay an extra $1B in tax with the crackdown on excessive deductions and profit-shifting to lower-taxing countries.

Individual taxpayers and businesses will also be targeted with the ATO cracking down on over-claiming deductions and incorrect reporting of income.

 

Due to high inflation and low wage growth, worker’s pay will effectively go backwards until 2024-25 when inflation is expected to return to 2-3%. Inflation is expected to peak at 7.75% in December.

 

The Better Regions Fund (BBRF) was the former Government’s regional grants program designed to deliver funding for regional infrastructure projects and community development activities. The Government scrapped the fund in the budget as they believe the fund wasn’t awarded based on merit and were favouring National Party electorates.

However, the budget includes a new national grants program.

 

Truck drivers will be hit with an extra 0.8 cents in tax for every litre of diesel they purchase. The Heavy Vehicle Road User Charge will increase from 26.4 cents/litre to 27.2cents/litre.

 

Consumer confidence continues to sit at a low, having peaked in 2021. The current figure is comparable to the start of the pandemic in 2020 and the Global Financial Crisis in 2008.

Source: Westpac-Melbourne Institute, MWM Research, October 2022
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Today’s Top Story – Western Australia continues to be the envy of the world.

The price of iron ore has never been so important to the Western Australian economy as has been evident in the recently announced state budget.  On the back of soaring iron ore prices, the state government collected nearly $8.45B in royalties from the miners who exported millions of tonnes of the ore to overseas markets, in particular China.

The forecast for the next 12 months shows a similar amount of royalties will be collected before prices start coming off their highs in 2022, or earlier.  It has been a huge windfall for the state and has cushioned the impact of Covid19 on the economy.  While other states’ economies have wallowed, Western Australia has powered on and even produced a healthy surplus for the last financial year.

Whether it was good planning or luck, the decision by the state government to keep miners going, at almost any cost, has proven to be a master stroke.  It didn’t matter if they were mining gold, copper or any other mineral or iron ore, miners ploughed ahead as other industries took a hit.  Fortunately, the mining industry kept alive manufacturers and industry related to the sector.

The state government cannot be complacent though, as it would not take much for the price of iron ore to come off the boil or buyers to disappear.  If Brazil can get Covid19 under control and exports crank up from them, China could well look away from Western Australia as their main source of the ore.  With the sometimes-delicate relationship we have with China it could mean they hit us in the wallet – just because they can.

The price per tonne of iron ore reached a low of $37USD in 2015 and has since soared to be currently sitting at $122USD.  Miners are making the most of it as well as the government and mine expansions are on the increase to cash in on the bonanza.

The miners are also tackling the issue of staffing as the FIFO experience has shown that having workers self-isolate when they travel from interstate is proving costly and is in no way practical.  It isn’t good for workers either who are spending more time away from family, if they are able to travel from interstate.  This is making the companies rethink their strategy of employing someone no matter where they live in Australia and encouraging workers to pack up and move west.

This is creating problems in the housing market across the board as rental vacancies have reached extremely low levels in Perth and major regional centres.  Real estate agencies are experiencing the best sales figures in a long time but unfortunately for sellers the needle is yet to move on house prices.  This will change as supply starts to dry up.  It will probably mean a boon for the state government as stamp duty revenue is sure to increase for them.

During the last mining boom thousands of people flocked to WA to make the most of the circumstances.  When mining went off the boil many returned to the east coast.  Will we see the same happen again and will it be a short term hit or can it be sustained?

Already the unemployment rate in WA has fallen below the expected rate of 8% and likely to fall further if circumstances don’t change because of Covid19.  With changes to Jobkeeper and Jobseeker being phased-in, unemployed people are more likely to seek out employment which will bring the rate down even further.

WA must surely be the envy of the other states, even if the borders are shut to the east coast.  A healthy economy, tourism experiencing healthy numbers from WA locals and mining powering on it all looks rosy for the near future.  Can the government make the most of it and plan wisely for that future?

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Today’s Top Story – Changes to Superannuation Reporting

Changes to Superannuation Reporting.

There appears to be some welcome changes into how superannuation funds will be scrutinised in the future, hopefully as early as July 2021.

The government is working on making funds more transparent in an attempt to expose those making poor returns for those contributing to them.  The Australian Prudential Regulatory Authority (APRA) will be responsible for testing each fund and any fund that fails the test two years in a row will not be allowed to take on new members.  The testing will be carried out over a rolling eight-year period to smooth out any unusual performances by funds.

The funds will also be more accountable to their members in much the same way ASX listed companies must be to their shareholders.  Details that will need to be disclosed in the proposed changes include: political donations, marketing expenditure, sponsorships, remuneration to executives and payment to industry bodies, trade associations or related parties.

An annual general meeting to face members may also be on the agenda, again, much like publicly listed companies.

A welcome change for super contributors will be the ability to take one superannuation fund from employer to employer, without having to create new accounts that some employers insist on.  This could have a dramatic effect on industry based super funds which have strong ties to unions.

The Productivity Commission has been working on how the testing will be done and Treasury is confident that the methodology will be right.

An issue that will need to be addressed will be the complexity of the reporting system that the funds will be required to do.  Fund members’ eyes could roll back in their head if standard financial reports are issued for them to consume.  A simple reporting system that is easy to read and understand for those that don’t have a financial background will be required if it is to have any meaning.

Another change that should be welcomed by fund members will be the requirement for funds to act in the “best financial interests” of its members.  Previously they only had to act in “the best interest”, which was far too broad a term for it to be truly meaningful.

But what about the government’s responsibility to those contributing to funds?

The maximum someone can contribute to a fund in one financial year is $25,000, after which they are taxed heavily for any additional funds deposited.  If we take a fund member who is approaching retirement, has no debt and accumulating cash in a bank account, why can’t they contribute more?

Currently, banks are offering virtually no return on deposits when compared to even a conservative superannuation fund.  What if the member could salary sacrifice a large portion of their salary into their fund and exceed the $25,000 threshold?  The government could still tax the excess but at a modest level compared to what it is now, and the person would be receiving far greater returns than what the bank is offering.

Afterall, one of the ideas of superannuation is for the person to fund their own retirement without having to rely on any government welfare to get them through.  The long-term savings for the government could be immense for a little pain in the present.  They could limit the pain by only making this option available to those over 60 who are approaching retirement age and more likely to have disposable income that they would like to use to secure their financial future.

Of course, there is also argument about the current and future levels of super contributions by employers.  Some want the level increased at a quicker rate than what is being forecast while others don’t want it increased at all.  For most the argument is about which option is going to be best for them.

Another argument is to abolish superannuation altogether and let individuals manage their own money.  The pros and cons of this are too great to tackle here and it is sure that everyone will have an opinion on this.

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Today’s Top Story – Federal Budget 20/21

Federal Budget 20/21

Jobs! Jobs! Jobs! has been the mantra of the federal government since they started “leaking” details of the budget before its official release last night.  And it seems they have put their money where their mouth is.

Employers, no matter how big or small they are, will receive up to $200 a week for each new employee they take on providing they meet certain criteria; employees will be required to work a minimum of 20 hours a week, and must have received the JobSeeker, Youth ­Allowance or parenting payment for at least one of the previous three months.  Employers must show that their payroll has increased as well as number of employees to qualify.

The scheme is to cost $4B over 12 months if the government’s prediction of 450,000 new positions is to be believed and could come in to law on Wednesday if legislation is passed in an omnibus bill to be introduced by the treasurer.  Called JobMaker Hiring Credit it is sure to go done well with employers.

The government is also pending $1.2B on wages subsidies in the hope that 100,000 new apprentices and trainees will enter the workforce.  This could be a huge boost for industries that still require hands on workers for skilled positions and hold back a looming shortfall in experienced tradesmen.

A win for businesses with a turnover of up to $5B will be the write-off on assets up to June 2022.  It is for capital equipment and will be welcome relief for those businesses looking to expand their business or make necessary capital purchases.  The government is hoping it will be a game changer, unlocking investment and boosting the order books of the nation.

Taxpayers have had a win in the budget with across the board tax cuts for all tax brackets.  The percentage of less tax people will be paying ranges from 3.8% for the highest bracket up to 21.4% for the those in the lower bracket; although the dollar figure is higher for the top bracket.

Some will benefit from the changing of the threshold for some of the lower brackets with people being able to earn more before tipping into a higher bracket.  The government has forecast that the extra money the consumers will have will create an extra 50,000 jobs.

The government will lose out on $12.5B in tax takings for this financial year, which will obviously add to the mounting debt expected to be near a trillion dollars.

There are other incentives to get business going in what will be the biggest budget spend this nation has ever seen.  However it is all predicated on the belief that there will be a vaccine for the Covid19 virus that has landed us in this predicament in the first place.  It is a big assumption to make and if a vaccine isn’t forthcoming then the budget forecasts will be doomed for failure.  For the sake of Australia we must hope that the assumption is right.

The Prime Minister and Treasurer have been quick to boast that this is the right budget for the right time to get spending going again.  The question will be, will those receiving the benefits turn it over in to the economy or will they use it to pay down debt or increase savings?  Only in due course will we know the answer to this.  If it does go back in to the economy then the optimistic predictions of the government may come to fruition.  If people hold on to it or just pay down debt then the less than optimal outcome will be pounced upon by the opposition who will make the most of it in the lead up to the next election.