A glimmer of hope

There is a chance, albeit a small chance, that Australia surmounts the severe obstacles presented by the mining investment downturn and declining terms of trade and that growth lifts closer to long-term trend in 2016. The Government’s 2015 Budget announced last night means in essence that its foot is being released from the brake no longer pushing against the efforts of the RBA to accelerate spending in the economy. The specific measures in the Budget are also helpful, notably those relating to small business (enterprises with turnover up to $A2 million a year) cutting the tax rate to 28.5% from 30% and providing a tax deduction on items up to $A20,000 per item, but without any cap on the number of items that can be claimed. Together with changes announced to fringe benefits tax (removing it on electronic items) and measures aimed at farmers to assist with drought relief and the cost of fencing the Government is directly stimulating parts of the economy that were looking worryingly soft – business confidence and non-mining business investment spending in particular. (VIEW LINK).