Is the federal budget good or bad for property investors?
While you can read what Steve McKnight has to say, what do you think? Have your say below.
There wasn't a great deal, really. There was a tightening of the ability to distribute profits from discretionary trusts to minors, removal of the Entrepreneurs Tax Offset, thats about it.
Hi Dan,
I think much of the budget pain is yet to be felt, but it will bite when electricity prices increase as welfare payments dip. It will be fascinating to see what happens with the carbon tax, and whether the government brings this in as the carrot to make amends for the welfare reductions.
You can see the political incentive… giving back what was taken away is still perceived as giving.
I agree that there weren't much visionary changes, which is why a lot of people are saying it is an uninspiring budget from a government in its first year. It's fair to say that the budgets in 2012 and 2013 are unlikely to be worse since Laor will want to remain in power.
Thanks for joining in the discussion.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Many years a go when I lived in the Wales UK, the government would adjust spending by simply putting up the percentage required to purchase vehicles, white goods etc. Example deposit required to purchase = 30%
We didn't have the Bank of England quite in the same position of authority as the RBA. While the RBA is independent of the government it is and can be influenced by government policy.
It seems a simple mechanism to introduce between the government and the RBA the ability to remove cash from the system thereby deflating demand and expenditure. Quit simply a "super2" whereby the treasurer can regulate the disposable income by manipulating this mechanism. For example instead of putting up interest rates (which is definately "in the square") the treasurer can initiate this when required, adjust the rate, use the funds to target activity to offset a declining domestic market. A good example of this would be to assist the first home buyer. Instead of issuing grants in the short term thereby creating a 24×7 impact on demand resulting in infationery house price rises, why not make this available via a minimum deposit with optional top up by the individual will result in a variable purchase activity = 24x7x52. As a result the market will not see peaks in activity and the subsequent erosion of asset price by triggering of a peak demand cycle. The effect would be to detach the first home buyer from the short term market and spread it over 24x7x52. The other groundshift would be in that abandoning the current interest rate heavy handed, broad brush and archaic approach whereby our hard earned cash is "robbed" from us would be replaced by a system that would quarantine our money for our future benefit. That would be acccepted by the Australian people.
Just imagine, it would provide a greater level of home ownership,and create an asset that could be drawn down on in future years. We could be safer knowing that we had super and super2 which could be low risk investment.That was the theory, now the subjective. Having been around for a while and fortunate to experience the many events that have impacted on the political and financial climate, I just want to paint a little picture. The two speed economy will create deep financial and social division. Here we have the middle classes being hit by the senseless application of a financial dictatorship (Note for the RBA, the chickens will come home to roost). A division and seperation of wealth that will not be closed if at all, for years to come. An extreme sense of detachment from the wealth creation of the resources industry. Make no mistake, the inability our of our current, previous or future governments to secure wealth from the resources industry for the benefit of Australia can only lead to one thing, nationalisation of the industry as it moves closer to becoming a prime asset with massive impact on the population and security of the nation. The shocking display of greed by the incumbant legion of mining executives when the return on investment spiralled beyond their belief due to unforeseen price rises (Twiggy I just don't believe you factored in the massive profit gains experienced by your company and others!) is just an example of the wealth division in action. My suggestion would be to remove the middleman and go straight to the buyer CHINA! afterall the mining industry isn't rocket science. Just try earning a quid in a competitive industry like manufacturing or farming (Do I see the commercial banks feeding off the less fortunate?).
Finally let me ask the question, during the great financial <moderator delete language> had the government not reacted quickly and decisively where do you think we would be today? Answer, probably in a mess like the US, UK, Greece, Portugal, Ireland, Spain, Iceland and the others. At least we had the opportunity to live and fight another day. I know what I would prefer. That's my pennies worth. Remember, we can't all be rich, but we can all be poor. Mike williams 12/5/11The budget was lacklustre. A budget by politicians bereft of vision, with micro 'cajones" and indebted to greedy, avaricious mining companies, bank and major corporations. The current government has nothing to offer and the opposition are little better.
Democracy has sunk to its lowest ebb. Representing the people is open to everyone, just like the Ritz Hotel! Just make sure your financial backers coffers are full and success is well-nigh guaranteed.
The government's actions, the 'stimulus' etc. did not save Australia from the GFC. It was a fortuitous chain of events that meant our banks were not loaded up with toxic sub-prime mortgage securities and our overall economy was tied in to the Asian (read China) resource boom. It was luck more than good planning, but naturally the government takes credit..
The issue the government now faces is a two-speed economy with mining and resources on fast forward and virtually everything else at a standstill. Not healthy. And banks which are sitting with the majority of their lending in residential mortgages in a falling (not slowing) market, where home owner's equity is being whittled away and where our houses are still massively overpriced by world standards.
Solutions are hard to come by and not for the faint-hearted (read 'politicians'). So there is likerly to be a lot more pain to come. And don't get me started on supposed low employment.! The mining sector is short of skilled labour but many Australians are nominally employed but vastly underemployed. Permanent full-time employment is becoming very much the exception not the rule.
I hope I am completely wrong in the above assessment, but am not holding my breath.
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