A budget like no other…
It’s the event of the year that has economists, accountants and investors more excited than a kid at Christmas. This week on Tuesday the 6 of October, Josh Frydenburg will announce the budget that is being predicted to be the worst budget deficit since the end of World War 2. Frydenburg believes the total deficit figure will be $281.4 billion!
Ahead of the official release the government has announced some measures that will be implemented.
Last Tuesday the government announced the JobMaker digital plan that will see $6.8 billion spent on NBN, cybersecurity and other infrastructure to ensure businesses are well equipped to take their practices digital.
It also aims to smoothen the administration process between business and the government when it comes to applying for stimulus payments that will enable “small businesses [to] get paid on time and ahead of time and inject much-needed cashflow into our economy” according to Morrison.
The government also has been significantly hinting at tax cuts, more specifically potentially bringing forward the reforms that were planned for 2022. This would see the marginal tax bracket of 19 cents on the dollar being expanded from people who earn $41,000 to $45,000. Similarly an expansion of the 32.5 cent bracket from $90,000 to $120,000.
The government is planning to spend a huge amount of money on infrastructure, a typical recession busting strategy that creates jobs in the short to medium term and leads to increased productivity of the economy in the long term.
RBA may be playing limbo with the cash rate
There has been increased speculation this week by various Chief Economists that the RBA will cut the cash rate to an all time low of 0.1%.
The cash rate announcement is coincidentally happening on the same day of the budget announcement, that will hopefully allow investors to feel more optimistic come Wednesday morning.
NAB and AMP Capital both believe the cash rate cut will happen sooner rather than later while Westpac Chief Economist believes the cut wont be made until later in the year, when the RBA can get a better understanding of how the Federal Budget will impact the economy.
ASX keeps on falling…
The ASX 200 closed 3% lower this week, ending off a horrible month for investors with a 2.3% fall across the entire month.
The news of both Donald and Melania Trump testing positive to Covid 19 has shocked markets. Investors hoping for a Trump reelection has been put into serious question, furthermore triggering the sell off.
On a more positive note, the news of New Zealanders being allowed to visit Northern Territory and New South Wales saw travel stocks such as Qantas and WebJet rise 4% and 6.43%, respectively during the week.