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.
RELATED ARTICLES
-
Australia’s spending surprise raises the odds of a February rate move — here’s how to protect margin and momentum
-
Australia’s inflation cools to 3.4% — why the RBA’s next move still isn’t a lay‑up for business
-
Inflation cools to 3.4% — but the RBA’s reaction function keeps businesses on a knife-edge
About the author
About the author
Economy
Australia’s spending surprise raises the odds of a February rate move — here’s how to protect margin and momentum
Household outlays are running hotter than economists expected, with the latest ABS readings showing broad-based gains across services and goods. That resilience is exactly the kind of demand impulse ...Read more
Economy
Australia’s inflation cools to 3.4% — why the RBA’s next move still isn’t a lay‑up for business
Headline inflation easing is good optics; balance sheets feel something different. With year‑on‑year CPI down to 3.4% in November from 3.8%, hopes for rate relief are rising — but policymakers remain ...Read more
Economy
Inflation cools to 3.4% — but the RBA’s reaction function keeps businesses on a knife-edge
Australia’s headline CPI edged down to 3.4% year-on-year in November, from 3.8%, easing immediate pressure but not eliminating the risk of further tightening. With services inflation sticky and ...Read more
Economy
Higher-for-longer, not higher forever: How Australia’s inflation ‘surprise’ is rewriting CFO playbooks for 2026
Australia’s latest inflation pulse eased but didn’t budge bank outlooks: near‑term rate cuts are still a long shot, with some houses flagging upside risk. That steadier‑for‑longer cash rate is pushing ...Read more
Economy
Australia's inflation illusion: the real challenge lies in pricing power and productivity
Headline inflation has cooled to 3.4% year-on-year, but the Reserve Bank’s caution—and a still‑hot housing backdrop—mean the rate threat hasn’t left the room. For boards, the next few quarters are ...Read more
Economy
When house prices lift, tills ring: A case study in turning Australia’s wealth effect into growth
Australia’s latest upswing in household wealth, anchored by higher dwelling values, is more than a feel‑good statistic—it is a profit and planning signal. The ABS notes property’s centrality to ...Read more
Economy
RBA's hawkish stance reflects inflation concerns, State Street economist comments
In a recent statement, the Reserve Bank of Australia (RBA) has signaled a hawkish stance on interest rates, drawing insights from financial experts about the implications for Australia's economic ...Read more
Economy
Navigating the inflation maze: How CFOs can outsmart economic hurdles in Australia
Fresh inflation data have cooled expectations of near-term rate cuts in Australia, intensifying pressure on margins, capital allocation and demand. Rather than wait for monetary relief that may not ...Read more
Economy
Australia’s spending surprise raises the odds of a February rate move — here’s how to protect margin and momentum
Household outlays are running hotter than economists expected, with the latest ABS readings showing broad-based gains across services and goods. That resilience is exactly the kind of demand impulse ...Read more
Economy
Australia’s inflation cools to 3.4% — why the RBA’s next move still isn’t a lay‑up for business
Headline inflation easing is good optics; balance sheets feel something different. With year‑on‑year CPI down to 3.4% in November from 3.8%, hopes for rate relief are rising — but policymakers remain ...Read more
Economy
Inflation cools to 3.4% — but the RBA’s reaction function keeps businesses on a knife-edge
Australia’s headline CPI edged down to 3.4% year-on-year in November, from 3.8%, easing immediate pressure but not eliminating the risk of further tightening. With services inflation sticky and ...Read more
Economy
Higher-for-longer, not higher forever: How Australia’s inflation ‘surprise’ is rewriting CFO playbooks for 2026
Australia’s latest inflation pulse eased but didn’t budge bank outlooks: near‑term rate cuts are still a long shot, with some houses flagging upside risk. That steadier‑for‑longer cash rate is pushing ...Read more
Economy
Australia's inflation illusion: the real challenge lies in pricing power and productivity
Headline inflation has cooled to 3.4% year-on-year, but the Reserve Bank’s caution—and a still‑hot housing backdrop—mean the rate threat hasn’t left the room. For boards, the next few quarters are ...Read more
Economy
When house prices lift, tills ring: A case study in turning Australia’s wealth effect into growth
Australia’s latest upswing in household wealth, anchored by higher dwelling values, is more than a feel‑good statistic—it is a profit and planning signal. The ABS notes property’s centrality to ...Read more
Economy
RBA's hawkish stance reflects inflation concerns, State Street economist comments
In a recent statement, the Reserve Bank of Australia (RBA) has signaled a hawkish stance on interest rates, drawing insights from financial experts about the implications for Australia's economic ...Read more
Economy
Navigating the inflation maze: How CFOs can outsmart economic hurdles in Australia
Fresh inflation data have cooled expectations of near-term rate cuts in Australia, intensifying pressure on margins, capital allocation and demand. Rather than wait for monetary relief that may not ...Read more
