As each year comes to a close, it marks the time for the Federal Government to release its mid-year budget update, known as MYEFO. This update can provide insights for business owners into the Government's economic expectations for the upcoming months. It also serves as an evaluation of policy decisions and measures introduced since the annual Federal Budget announcement.
In addition to the Federal MYEFO, there are also state budget updates that offer valuable indications of potential upcoming business opportunities. MYEFO typically prompts analysis and commentary from financial experts. Given that this year's MYEFO coincides with the emergence of Omicron cases, the outlook may hold heightened significance.
The mid-year budget update presents a substantial amount of information for business owners to navigate and assess in relation to their own operations. To provide assistance, we've compiled a summary of the key messages from our specific perspective as providers of truck finance.
Federal Mid-Year Budget Update: MYEFO
MYEFO is not just an opportunity for the government of the day to report back to the country but is actually required in accordance with the Charter of Budget Honesty. The Mid-Year Economic and Fiscal Outlook looks at how decisions in regard to the budget have played out so far in the financial year and what adjustments need to be made to the payments and the receipts included in the budget estimates.
For those who want the full story the entire 428 page document is posted to the Federal Treasury website.
For those who want the main points from the document and comments by the Treasurer….
- Federal Treasurer Josh Frydenberg says the Australian economy is primed for lift-off in the coming year.
- Despite Omicron cases on the rise, the nature of the variant so far indicate that the economy would continue to rebound. Restrictions are expected to continue to ease and the continued fall in unemployment anticipated.
- The return of skilled workers as well as international students should fill labour shortages which are currently impairing full operations and recovery in a number of key sectors.
- Unemployment forecasts: in 2022 4.5% and by 2023 June quarter dropping to 4.25%
- Deficit to be reduced over coming 4 years with tax revenue increases.
- Real GDP growth 21/22 at 3.75%, in 22/23 3.5%
- Targeted programs and measures introduced to deal with labour shortages
Comments from RBA
On the same day as the Treasurer released MYEFO, RBA Governor Philip Lowe addressed a business group and provided insights regarding potential impacts of the new COVID variant. Given that the RBA determines the official cash rate, which subsequently influences interest rates for truck loans, his remarks carry significant weight.
While acknowledging the risk posed by the Omicron variant, Dr. Lowe also expressed optimism that the economy's positive rebound would continue through the summer. He highlighted Australia's high vaccination rates, the gradual reopening of the economy, and other factors as contributing to this ongoing momentum.
In terms of interest rates, Dr. Lowe reiterated the consistent message from the RBA over the past year: the decision to raise the official cash rate would hinge on sustained inflation within the range of 2-3% and a decrease in unemployment. He indicated that these conditions were not expected to be met during 2022.
Update on NSW Budget
In the same week, NSW Treasurer Matt Kean presented the half-yearly budget update to Parliament, shedding light on the significant impact that the prolonged lockdowns had on the state's budget deficit and overall financial standing.
Mr. Kean expressed his anticipation that the jobs that were lost during the lockdown and Delta variant period would be regained by early 2022. Despite the challenges faced, the economy is projected to maintain its recovery trajectory.
More information on the NSW budget situation can be found at the Treasury NSW website and keen readers can refer to the complete document.
Impact on Truck Loans
The MYEFO and other mid-year state updates do not have a direct impact on the official cash rate or the interest rates for truck loans. As Dr. Lowe mentioned, it's anticipated that the official cash rate won't be raised until around 2024.
However, for business owners, the importance of these announcements in the current climate could be related to labour shortages. With the insights provided and the steps being taken to tackle these shortages, business operators might feel more assured to move forward with new vehicle investments.
For those keen to realise the tax deduction afforded by temporary full expensing in this financial year, this could be the time to get organised with your acquisition. Chattel Mortgage for truck & trailer financing is most suitable for temporary full expensing and IAWO and attracts the lowest truck finance interest rate across our loan portfolio.
Contact Jade Truck Loans on 1300 000 003 to discuss low interest rate truck loans.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.