Budget Update: Australia to Run Economy Hot

The Government has unveiled a big spending budget that aims to add fuel to the economy and drive unemployment down to levels rarely seen in the past 50 years. The Budget is further evidence of a transition from crisis support to growth recovery, as the economy exhibits a sharp V-shaped rebound; GDP growth is now expected to be 4.2% in FY2021/22 up from the December estimate of 3.5% leaving Australia in an enviable economic position. With leading indicators such as the ASX and business confidence at record highs and iron ore prices touching $US230 per tonne (against treasury estimated of US$55 for the Budget), the Government appears determined to capitalise on this strong momentum.

Extended tax cuts for both business and households should be a boon for demand and employment growth. The Government’s re-orientation to big spender is a dramatic turnaround from just 18 months ago, when it was driving toward the first budget surplus in a decade. This is being aided by low borrowing costs and a better starting position than global peers. Net debt is expected to be at 34.2% of GDP in June next year and peak just shy of A$1 trillion in June 2025, or 40.9% of GDP. That’s about half the U.S. and U.K. levels and about one-third of Japan’s, according to budget estimates.  The budget was well received by the three major credit ratings agencies that reaffirmed Australia’s AAA rating.

Nexus Private Financial Planning have hand-picked several proposals, which may assist our clients in building future wealth in a tax-effective manner:

  • Individuals aged 67 – 74 will not be required to meet a work test to make non-concessional contributions to Super and will also be able to access the non-concessional ‘bring-forward’ arrangements. This would potentially enable a contribution of up to $330,000 in a single income year for individuals who are eligible. Those who sell property or receive a financial windfall, for example, may be able to accumulate more retirement savings in a tax-friendly environment.
  • The eligibility for downsizer Super contributions will reduce from age 65 to 60, which can be made up to maximum of $300,000 per individual, despite Super balance, work status and regardless of age. This provides additional flexibility to those under 65 who may wish to downsize to a more suitable home and at the same time contribute up to $630,000 to their Super, when combined with the non-concessional bring-forward rule.
  • A higher subsidy of 95% for childcare fees, from the current 85%, will apply to the second and any subsequent child in care for families with multiple children under five in childcare. In addition, families with a combined income above $189,390 will no longer be subject to the childcare subsidy cap of $10,560 per child, which will be abolished. Both proposals have the potential free up cash flows to assist with living expenses or for further investment opportunities.
  • Housing markets are believed to remain strong with incentives to first home buyers, down-sizers and the expected influx of migrants wanting to enter the ‘Lucky Country’ once our international borders re-open.

Please see below a Federal Budget Summary by the IOOF Tech Team, which provides further details.

Federal Budget Summary

Should you wish to discuss further please feel free to contact Nexus.

Dane Allen
Financial Adviser

We specialise in customising strategic solutions across a range of financial services.


Nexus Private Wealth Management is privately owned and not licensed by a bank or institution. We do not sell our own financial products or property.

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