Invest
Lots of ammo, wrong target: Budget fails to hit its mark
The latest Treasury budget is the right size but is poorly targeted, with the focus on supply when a lack of demand is the real issue, according to an expert.
Lots of ammo, wrong target: Budget fails to hit its mark
The latest Treasury budget is the right size but is poorly targeted, with the focus on supply when a lack of demand is the real issue, according to an expert.
Nucleus Wealth’s head of investment, Damien Klassen, said the budget should be focused on weak demand, with many of the stimulus packages being put forward unlikely to help the economy.
“The budget has a huge focus on supply-side support. Supply is not the problem! Everyone has spare capacity. Demand is weak and needs help, not supply,” Mr Klassen said.
“Giving money to companies to hire more workers when the existing workers are not at full capacity is not going to help. Giving companies tax credits to buy new equipment doesn’t help if the old equipment is running at 60 per cent capacity.”
He also pointed to the credit to manufacturing though Australia does not produce its own goods anymore.
“$30 billion on company tax incentives and another $1.5 billion on a Modern Manufacturing Strategy is a noble endeavour. But that money is going to buy Chinese, Japanese and US robots. I’m sure those countries will be grateful for the demand. Australian taxpayer-funded stimulus payments should really be targeted to support Australian jobs.”
Mr Klassen also pointed to the fiscal cliff with government support greatly changing during the next quarter.
“The drop off in spending is really, really large from Q3 to Q4. In Q3, government (and superannuation drawdown) support was over $100 billion. In Q4 it looks like being almost 70 per cent lower. Q1 of 2021 will be 70 per cent lower than Q4.”
“COVID is looking increasingly like a marathon. Australia came out of the gates sprinting; we’ve now dropped to slow to a walk. In three months, it will be a crawl,” he said.
Finally, he pointed to large sectors of Australia’s economy, including tourism, education and migration, which will be unlikely to return quickly.
“This budget didn’t tick many boxes. Don’t get me wrong, the fiscal cannon is large enough to help. There is enough ammunition loaded into the cannon. But it has been pointed in the wrong direction. Which means it will likely need to be fired again within the next 12 months,” Mr Klassen concluded.
About the author
About the author
Economy
Global economy predicted to pause before soaring in 2021
2021 will provide investors the opportunity to cash in on private markets and businesses hurt, but not permanently damaged, by the pandemic as accommodating policies and pent-up demand drive global gr...Read more
Economy
5 predictions for the Australian economy in 2021
The Australian economy is tipped to be one of five nations to outshine, with a win on the health front likely to act as tailwind, a new report has revealed. ...Read more
Economy
Deloitte calls vaccine a ‘game changer’ as 77% of Aussies welcome jab
As many as three-quarters of Aussies are willing to be vaccinated once a new coronavirus vaccine becomes publicly available, new research has revealed, as Deloitte Access Economics calls the vaccine ...Read more
Economy
Markets react to Biden’s stimulus package
The US markets have reacted negatively to President-elect Joe Biden’s US$1.9 trillion ($2.44 trillion) bailout proposal, amid mass job losses as the US continues to struggle with the COVID-19 pandem...Read more
Economy
‘Aussies to keep economy ticking with $200bn in savings’
The government is counting on Aussies to use their savings to drive economic recovery once temporary support measures are wound back at the end of March. ...Read more
Economy
Business improves but COVID threat remains
The Australian economy continues to show signs of life, with businesses’ payment times improving despite recent outbreaks of COVID-19, new research has revealed. ...Read more
Economy
10 impacts the US ‘blue wave’ will have on investors
With the US Senate run-off falling to the Democrats, a new blue wave is spurring optimism for investors, a chief strategist has said. ...Read more
Economy
Frydenberg confident vaccine rollout will boost the economy
The economy and the budget are expected to reap the benefits of the earlier than planned vaccine rollout, following a series of unexpected lockdowns which have already put a dent on the government’s...Read more
Economy
Global economy predicted to pause before soaring in 2021
2021 will provide investors the opportunity to cash in on private markets and businesses hurt, but not permanently damaged, by the pandemic as accommodating policies and pent-up demand drive global gr...Read more
Economy
5 predictions for the Australian economy in 2021
The Australian economy is tipped to be one of five nations to outshine, with a win on the health front likely to act as tailwind, a new report has revealed. ...Read more
Economy
Deloitte calls vaccine a ‘game changer’ as 77% of Aussies welcome jab
As many as three-quarters of Aussies are willing to be vaccinated once a new coronavirus vaccine becomes publicly available, new research has revealed, as Deloitte Access Economics calls the vaccine ...Read more
Economy
Markets react to Biden’s stimulus package
The US markets have reacted negatively to President-elect Joe Biden’s US$1.9 trillion ($2.44 trillion) bailout proposal, amid mass job losses as the US continues to struggle with the COVID-19 pandem...Read more
Economy
‘Aussies to keep economy ticking with $200bn in savings’
The government is counting on Aussies to use their savings to drive economic recovery once temporary support measures are wound back at the end of March. ...Read more
Economy
Business improves but COVID threat remains
The Australian economy continues to show signs of life, with businesses’ payment times improving despite recent outbreaks of COVID-19, new research has revealed. ...Read more
Economy
10 impacts the US ‘blue wave’ will have on investors
With the US Senate run-off falling to the Democrats, a new blue wave is spurring optimism for investors, a chief strategist has said. ...Read more
Economy
Frydenberg confident vaccine rollout will boost the economy
The economy and the budget are expected to reap the benefits of the earlier than planned vaccine rollout, following a series of unexpected lockdowns which have already put a dent on the government’s...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
