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Inside scoop: David Koch's Budget wrap-up


Finance expert David Koch takes a look at the details of Wayne Swan's fifth budget.

What does budget mean for small business? Visit Kochie's Business Builders
David Koch's blog

The investment climate being forecast by this Federal Budget is pretty steady as she goes;

Australia’s economic miracle will continue

Despite the Budget forecasting a further deterioration in Europe and further stagnation in America it sees China maintaining its economic growth and underpinning our commodities boom.

The Budget predicts economic growth over next financial year at 3.25 per cent, inflation also at 3.25 per cent, unemployment 5.25 per cent and wages growth 3.5 per cent.

While the patchwork economy will continue, generally Australia has a pretty healthy business climate when compared with the rest of the world.

Unfortunately the overseas gloom has been caught by Australian consumers who have also gone into their shell and hurt retailers and property sector.

Interest rates will fall

The Treasurer very bluntly challenges the Reserve Bank to make further deep cut in interest rates because the Government has done the right thing in cutting expenditure and being responsible economic managers.

The Reserve Bank will wait for the Government to prove that it will get all the budget measures passed through the parliament before it does anything but most economists are forecasting between 0.5 per cent and 0.75 per cent cuts before the end of the year.

Naturally it will depend on the banks on how much of this will be passed through to customers.

Overall though, borrowers should get some sort of relief on their interest bills but those looking for interest returns on their savings should probably lock in at current rates or start looking for other income producing options.

Australian dollar will stay at these levels

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The Budget is assuming the Australian dollar will stay around $US1.03 for the foreseeable future. So there isn’t expected to be any relief for those companies suffering now.

Retailers are finding it hard to make a buck because of import prices falling while the competitiveness of non resource exporters has been hit by the high value of the currency.


The woes for these listed companies are likely to continue.

The high currency also means overseas investments need to watched carefully and possibly hedged. It’s not much point bringing US dollar denominated investments back to Australia with the currency at these levels.

Property will continue to be soft

The Budget is forecasting no significant improvement in dwelling investment for the next year although infrastructure will stay strong.

Outside of the Budget all the lead indicators suggest the residential property market will stagnate or continue to fall depending on the region.