Economics
Issue No. 41 - June/July 2008
‘Saver’ Budget for global turmoil
by Darryl Gobbett
Prescott Securities’ annual Budget review was an interesting combination of economic context and highlights, delivered by economic authority Darryl Gobbett and financial planner Helen Dundon, that sketched the economic conditions we would face during the coming year.
He was obviously enjoying the epochal change, but Darryl expressed regret at “the end of the Costello era, which was sad from a theatrics point of view”.
And as it was set against the background of global upheaval, Darryl remarked how relatively minor the Budget changes were: a little something for everyone, which was usual, but nothing on superannuation, which was not.
He noted the tax review to come later this year, with results to be announced in 2009, and touched on the nominal surplus – whether or not the surplus existed was a moot point until details of how the three giant funds would work were revealed.
The Government was still “monitoring debt”, but by converting Budget surplus into the new funds it would become a significant “saver” during the next two years.
Joining the existing $60bn Future Fund the three new funds – Building Australia ($20bn for infrastructure), Educating Australia ($11bn) and Health and Hospitals ($10bn) - together made up $100bn, or 10-12% of Australia’s total capitalisation.
“Those of you here who are traders will find you have to take note of how the Funds are feeling on a particular day,” Darryl observed.
Darryl was critical of the Rudd Government’s move to shift more of the income tax burden from individuals to companies. Company tax as a percentage of GDP had doubled since the 1980s. He called the shift “considerable” and warned it “could not continue”.
The economy is still growing strongly but the Budget approach suggested the Government expects it to slow significantly during the next year.
The slowing would come from to the enormous drag of about $232billion in aggregate ...
