21 September 2023
Your Market Update - September Summary
Positioning for economic slowdown
The much-anticipated slowdown in economic growth appears to be upon us, with Gross Domestic Product (GDP) in Australia slowing to 2.3%. While only slightly below long-term trend GDP at this point, it is the direction and speed of travel that counts. Discretionary spending has eased (-1.0%), as cost of living pressures finally hit the consumer. Perhaps not surprisingly, the slowdown is being felt most in the more expensive housing markets of NSW and Victoria, where high house prices translate into high mortgage costs.
As reporting season wraps up, the picture is also becoming clearer for corporates. Earnings have come down, but not by as much as expected which has pleased equity markets. There have been good reasons why earnings have been so resilient to date; from very tight labour markets to consumers being flush with covid cash buffers and businesses, in many cases, able to pass on rising input costs. Looking forward, however, earnings growth looks harder to come by in 2024 as these tailwinds ease. The impact of rising rates, tighter credit conditions and higher costs are indeed feeding through the economy albeit with a long lag.
Our base case remains that Australia will avoid recession thanks to a significant rebound in migration this year and the continued demand for our resources as the global economy continues its decarbonisation path. Inflation continues to soften slowly, with the latest headline number coming in at 4.9%. It’s still a long way away from the central bank’s target range of 2-3%. The RBA has kept rates on hold for a second month in a row but remains on alert as inflation has the potential to remain stickier here than in other parts of the developed world.
We remain cautious and positioned for the weaker economic conditions ahead. Our focus is on quality investments, liquid assets and active portfolio management which should put us in good stead to manage any volatility that may arise as the year progresses.
Market Developments during August 2023
The S&P/ASX 200 Accumulation Index fell 0.7% in August, as earnings results dampened market returns. Of the 11 sectors, only Consumer Discretionary (+5.7%), Property (+2.3%) and Energy (+0.5%) had positive returns for the month, while Utilities (-3.9%) and Consumer Staples (-3.2%) were the biggest drags on the Index.
Share prices battled with a combination of mixed earnings results and a conservative outlook for companies, while soft economic data out of China continued to weigh on local investors.
Consumer Discretionary was the standout performer for the month, benefitting from resilient consumers. Given the continued strain on households through a higher cost-of-living, many companies in the sector had flagged headwinds in the months leading into reporting season, with a conservative outlook already baked into share prices. Another theme to emerge from earnings reports is the ability for companies to manage cost pressures, particularly those brought about through higher financing rates. Despite revenue growth, Consumer Staples reported disappointing profit results, leading to their waning share prices. More broadly, the sustained impact of a slowing Chinese economy was seen across the market, particularly Materials.
Primarily negative economic data in August resulted in a rise in bond yields and a decrease in equity markets. With renewed investor concerns, US equities stumbled with the S&P500 Index declining -1.6% (in local currency terms) during the month.
Most sectors across Europe fell, with the DAX 30 Index returning -3.0% (in local currency terms) for the month. Energy was one of the sole positive contributors, inflation has remained stable but is yet to decline below previous months levels. The European Central Bank’s next meeting will be a watch point for investors.
China experienced some of the sharpest declines for the month with a potentially challenged real estate sector. Investor concerns around stimulus deployment largely contributed to this decline, with the CSI 300 Index returning -6.0% (in local currency terms) for the month (in local currency terms).
In their August meeting, the Reserve Bank of Australia have for the second time elected to pause rate hikes and leave the target cash rate at 4.10%, citing slowing economic growth and pressure on household budgets. The Australian bond market reacted mildly, with Australian 2- and 10- Year Bond yields falling 23bps and 3bps respectively over the course of the month. The Australian yield curve continued to flatten throughout August, and the Bloomberg AusBond Bank Bill Index returned 0.37%.
Markets expected – and received - a similar story in September, with the RBA holding rates steady. RBA Governor Philip Lowe’s tenure has now ended, and the position will be headed by his deputy Michele Bullock.
In the US, the Federal Funds Rate remains at 5.25%-5.50% following the most recent July rate hike, with the Fed’s first rate cut being priced into futures contracts by March 2024. The Bloomberg Barclays Global Aggregate Index (AUD) returned 2.62% over the month, and US 2- and 10-Year Treasury yields rose 1bp and 15bps respectively. In the UK, the interest rate is similarly at 5.25% after the BoE hiked by 25bps in their August 2 meeting, resulting in UK Gilt yields rising over the month.
REIT’s (listed property securities)
The S&P/ASX 200 A-REIT Accumulation Index finished +2.3% higher in the month of August as the A-REIT sector continued its consolidation in recent months. In contrast, the Global Real Estate Equities market (represented by the FTSE EPRA/NAREIT Developed Ex Australia Index (AUD Hedged) finished lower (-2.7%). The Australian Infrastructure sector (as represented by the S&P/ASX Infrastructure Index) finished -2.8% lower.
The Australian residential property market experienced an increase by +0.1% Month on Month (as represented by CoreLogic’s five capital city aggregate). Brisbane was the biggest riser (+1.5%), followed by Adelaide (+1.1%). Over the one-year period, Perth was the largest gainer (+4.5%). In contrast, Hobart (-0.1%) was the only city to deliver negative returns in the month of August. Similarly, Hobart has the lowest percentage change year on year (-10.0%).
18 August 2023
Your Market Update - August Summary
Bonds vs Equities – what are the capital markets trying to tell us?
Bond markets across a number of developed countries including the US, UK and Germany are currently pricing in a recession. Global stock indices are close to, if not at, all-time highs. What exactly are the capital markets trying to tell us about the state of the economy?
Stock prices are a well-known leading indicator of the business cycle and future economic growth. They are among a handful of leading economic indicators (LEI) that analysts typically follow when trying to get an overall view of economic activity. Stock prices have been on a winning streak this year, with global equities as measured by the MSCI World TR Index AUD up 16% over the 6 months to 31 July 2023. The rally has been led by the US where the launch of artificial intelligence technologies such as ChatGPT, have created enormous buzz and excitement around potential productivity gains.
Bond markets are taking a much more negative view. Taking the 10-year to two-year Treasury spread, yield curves in the US, UK and Germany are currently inverted. In Australia, the yield curve, while not yet inverted, is flat by historical standards. Inverted yield curves are typically good indicators that recession looms. Inverted yield curves reflect the expectation from bond investors that longer-term interest rates will fall; a situation typically associated with recessions.
So are bond or equity investors right? Inverted yield curves, while pretty reliable indicators, can and do give false signals from time to time. Equity markets too, can be prone to over-optimism, often overshooting fundamentals based on sentiment. Weighing the conflicting signals, our view is that we are headed for a period of weaker growth. The equity market rally to date has been narrow and centred around US mega tech stocks. Should we see greater breadth and participation in this rally, we may have cause to reconsider. Putting stock prices aside, most other leading indicators are pointing to a further slowdown in the business cycle. Consumer sentiment is extremely low, housing starts are weak, money supply is tightening and Purchasing Manager Indices remain in contractionary territory. These data points lead us to believe that the second half of 2023 continues to present some headwinds for the economy and risk assets in general.
Market Developments during July 2023
The S&P/ASX 200 Accumulation Index finished July up 2.9%, the second-best monthly performance for the index this year. Commodity price rises aided the gains, while consumer sentiment has improved with positive inflation and employment data releases. In all, 9 of the 11 Sectors in the Index finished positively, with Health Care (-1.5%) and Consumer Staples (-1.0%) the only laggards.
The driving factor in the Energy sector (+8.8%) was rising commodity prices, particularly oil. This was particularly evident in Woodside (ASX: WDS), which also benefitted from a quarterly update that was received positively by investors.
Meanwhile, the other monthly leader, Financials ex-Property, (+4.9%) saw investors pile into the “Big 4” banks all having strong months in July. While the RBA has left rates on hold, the banks have continued to increase their rates for home loan borrowers. Investors expect the rate rises from the lenders to ease competition and lead to higher net interest margins.
Global equities ended with a predominantly positive month with stabilising economic data. Emerging markets outperformed developed market counterparts returning 4.9% (MSCI Emerging Markets Index (AUD)) versus a 2.1% gain according to the MSCI World Ex Australia Index (AUD).
The U.S. markets had mixed results again, with inflation data falling in line with another expected rate hike. Most sectors were positive with standouts in Technology and Energy rising largely due to increased strength in suppliers. The S&P500 Index posted a gain of 3.2% (in local currency terms).
Emerging markets rallied strongest for the month, as China’s economic growth recovery plan continues, with new stimulus having positive effects across sectors; specifically manufacturing and real estate as indicated by development data. The CSI 300 Index returned 5.3% for the month (in local currency terms).
The RBA has left the cash rate on hold at its July meeting at 4.1%, pausing what has been an aggressive rate hiking cycle. The market responded with Australian 2-Year and 10-Year bond yields remaining elevated and rising by 4bps and 5bps respectively. Fixed income markets started to see some gains, with the Bloomberg AusBond Composite 0+ Yr Index returning 0.5% over the month.
In the US, bond markets continue to price the possibility of a recession and the US yield curve is inverted. The Federal Reserve raised rates in July by 25bps, lifting the benchmark rate to 5.25-5.5%, which is the highest this range has been in 22 years. The market responded with US 10-Year and 2-Year Treasury yields rising by 15bps and 9bps, respectively. Globally, higher yields led to losses in fixed income markets, with the Bloomberg Barclays Global Aggregate Index (AUD) returning -0.5% over July.
REIT’s (listed property securities)
The S&P/ASX 200 A-REIT Accumulation index advanced during July, with the index finishing the month 3.8% higher. Global real estate equities (represented by the FTSE EPRA/NAREIT Developed Ex Australia Index (AUD Hedged)) also finished strongly, advancing 3.2% for the month. Australian infrastructure performed well during July, with the S&P/ASX Infrastructure Index TR advancing 4.1% for the month and up 13.2% YTD.
The Australian residential property market experienced an increase of +0.9% Month on Month (as represented by CoreLogic’s five capital city aggregate). Brisbane and Adelaide were the biggest movers (both +1.4%) with Perth (+1%) also performing strongly. All five capital cities performed positively for the third consecutive month.
22 June 2023
Summary of Key Views – Cloudy skies
Inflation is likely to ease substantially in the coming months as base effects roll off and tighter credit conditions hit consumption and aggregate demand. Services inflation, rent rises and wage pressures however persist, meaning inflation could remain sticky and above central bank target ranges for some time. Financial conditions are therefore likely to remain tight as central banks keep a foot on the brake while managing pockets of stress via targeted liquidity support.
Domestically, a large number of home borrowers will roll off ultra-low fixed rate home loans onto significantly higher mortgage rates in the coming months. This means there is more tightening to come for the Australian household sector irrespective of how much higher the RBA takes the cash rate.
Consumer confidence remains weak both here and in the US, and with the cash buffers built up during the pandemic largely eroded, signs that economic growth has begun to slow have emerged. US GDP came in well below expectations at +1.1% (annualised) for the first quarter.
On a positive note, valuations are looking more appealing across a range of asset classes. Australian equity valuations are almost looking as attractive as they were during the peak stresses of the pandemic on a P/E basis. Tight financial conditions coupled with a weakening cyclical environment lead us to believe that the second half of 2023 continues to present some headwinds for risk assets notwithstanding the more attractive valuations we are seeing.
In the current environment, a focus on quality investments, liquidity, active portfolio management, diversification and risk control become even more critical for portfolio constructors. We continue to monitor developments regarding inflation, monetary policy and the global economy, and will adjust our portfolios, as necessary, to navigate through the challenges and opportunities ahead.
Market Developments during May 2023
In May the S&P/ASX 200 Accumulation Index finished with a loss of 2.5%. Rising costs have begun to materialise for consumers as retail turnover plateaued, with another RBA hike and a fall in the iron ore price also impacting returns. Information Technology (I.T.) shares rose significantly (+11.6%), with Utilities making the only other meaningful jump (+1.1%). Consumer Discretionary (-6.1%) and Staples (-4.6%) were noteworthy laggards. Materials (-4.4%) and Financials ex-Property (-3.3%) also dragged on the Index. In total, 7 of the 11 sectors posted losses. I.T. advanced on the positive news from some of its names, while attention on the rise of artificial intelligence also aided gains. Meanwhile, retail spending data led to investors positioning for a slowdown, as cost of living pressures saw consumers pull back on non-essential shopping. As doubts linger around the economic recovery in China, the sliding price of iron ore hampered Materials. Financials ex-Property were pushed down by poor US banking sentiment, as well as concerns about the domestic outlook for earnings and margins.
Global equities ended with a predominantly negative month with declining economic data. Emerging markets underperformed developed market counterparts returning 0.4% (MSCI Emerging Markets Index (AUD)) versus a 1.2% gain according to the MSCI World Ex Australia Index (AUD).
The U.S. markets had mixed results, with the debt ceiling debate being suspended on top of another expected rate hike. Lower unemployment and promising developments in the technology sector, particularly artificial intelligence and chipmakers, led a positive gain of 0.4% in the S&P500 Index (in local currency terms).
Equities across Asia were also mixed, Japanese stocks became more attractive for investors with sound earnings results with share buyback announcements for large cap stocks. The Nikkei 225 Index reached new highs with a gain of 7.0% for the month (in local currency terms). China’s economic growth recovery continued to perform beneath investors' expectations with demand also decreasing. This was reflected by the Hang Seng Index and the CSI 300 Index, returning -7.9% and -5.6% respectively (in local currency terms) for the month. Investors are waiting for stronger indications of an economic recovery in China, potentially led by the technology sector.
Credit markets saw a decline as interest rates rose again in May when the Reserve Bank of Australia increased the official cash rate from 3.60% to 3.85%, leading to a -1.21% return of the Bloomberg AusBond Composite 0+ Yr Index. Over the course of the month, spreads widened as Australian 2Y and 10Y Bond yields rose by 50bps and 27bps, respectively. Persistent inflation pressures along with a strong labour market and rising wages have the potential to keep inflation rates above the RBA target for an extended period.
Global markets were taken aback in early March by the unexpected failure of three small- to mid- size US banks, followed by the collapse of Credit Suisse. The effects from the March turmoil continue to affect markets with the Bloomberg Barclays Global Aggregate Index (AUD hedged) returning -0.54% over May. In a decision widely expected by markets, the U.S Federal Reserve again increased rates by 25bps bringing the federal funds rate to a target of 5.0%-5.25%. Bond yields continued to grow with US 2Y and 10Y Treasury Note yields rising 45bps and 22bps, respectively.
REIT’s (listed property securities)
The S&P/ASX 200 A-REIT Accumulation index regressed in May after a strong rally in April, with the index finishing the month –1.8% lower. Global real estate equities (represented by the FTSE EPRA/NAREIT Developed Ex Australia Index (AUD Hedged)) also regressed, returning -3.8% for the month. Australian infrastructure continued its positive momentum during May, with the S&P/ASX Infrastructure Index TR advancing +1.5% for the month.
The Australian residential property market experienced an increase by +1.4% Month on Month (as represented by CoreLogic’s five capital city aggregate). Sydney was the biggest riser (+1.8%) alongside Brisbane (+1.4%) also performing strongly. All five capital cities performed positively in the month for the first time in over two years.
29 May 2023
Caution amidst the calm?
An eerie calm has fallen over markets in recent weeks, as the banking stresses of early March fade into the background. Market measures of risk, such as the VIX, have retreated, while global equity markets have rebounded strongly, buoyed by a resurgence in technology stocks.
We remain somewhat cautious. We have seen a rapid shift from record-low interest rates and abundant liquidity to an environment of higher interest rates, central banks shrinking their bloated balance sheets and a general tightening in lending standards. These tighter liquidity conditions will continue to impact the economy and markets over the course of the year.
From a macro perspective, inflation has peaked but is proving sticky. While goods inflation has come down as the covid-era shortages have largely eased, services inflation and rising wage costs are complicating issues. We think central banks may have more work to do to really drive those inflation numbers down. A lengthy period of sub-par growth may be required to tame inflation, meaning a pause is more likely than an outright pivot, barring any further financial instability.
Growth has been surprisingly resilient to date thanks in part to a resilient consumer, tight labour markets, a milder European winter than expected and the China re-opening story. However, our base case remains that growth will slow as the year progresses, as the lagged effect of rising interest rates and cost of living pressures make their way through the economy.
In our view, none of these factors point to a great environment for risk assets despite the more attractive valuations we are seeing. We remain close to benchmark with a slight underweight in global equities while remaining alert to risks and opportunities as they emerge.
Market Developments during April 2023
The S&P/ASX 200 Accumulation Index finished April with a gain of 1.9% after two negative performing months. Softer inflation figures and a pause in the RBA’s rate hikes led to strong gains in the first half of the month, while a slump in commodity prices, particularly iron ore, moderated those gains in the back-half of April. Property was a key contributor (+5.3%), with I.T. (+4.8%) and Industrials (+4.5%) also performing strongly. Materials (-2.6%) was the sole detractor.
Property led all sectors for the month off the back of the RBA’s rate decision, meanwhile, slowing construction activity in China contributed to the declines in Materials stocks. Overall, domestic markets were driven by relief from inflation data and the interest rate pause, while concerns around the U.S. banking system were somewhat tempered. These factors were all conducive to a positive month for the Index.
Global equities started with another positive month despite mounting higher interest rates. Emerging markets underperformed developed market counterparts returning 0.2% (MSCI Emerging Markets Index (AUD)) versus a 3.2% gain according to the MSCI World Ex Australia Index (AUD).
A greater proportion of earnings surprises and decreased investor expectations have buoyed the U.S. markets, coupled with an outlook for disinflation to continue. Over half of companies have now reported, with the S&P 500 Index posting a 1.6% return (in local currency terms) for the month.
UK economic data followed a similar pattern with headline inflation also falling slightly. The FTSE 100 Index was one of the top performers globally having a gain of 3.4% (in local currency terms). This was driven by a resurgence in value stocks leading the UK index charge.
Equities across China saw a decline off the back of concerns on the economic recovery slowing down. This was reflected by the Hang Seng Index and the CSI 300 Index, returning -2.4% and -0.5% respectively (in local currency terms) for the month. Expectations are that China’s central bank will ease policy to support weakening economic data.
In April, the bond market remained range-bound despite concerns over fallout from banking developments in March. US short-term Treasury Bills declined due to uncertainty regarding the debt ceiling with further volatility expected over the next few months.
The Australian 2-year and 10-year government bond yields were relatively unchanged, only moving up 9bps and 4bps respectively. The Bloomberg Ausbond Composite 0+ Yr Index reflected a return of 0.2% for the month. The US 2- and 10- year Government bond yields fell by 2bps and 5bps, respectively. In the United Kingdom, GILT yields rose due to resilient activity data and inflation surprises. The 2 Year Gilt yields rose 34bps and 10 Year Gilt yields rose 22bps. During the month, higher quality fixed income delivered strong performance as spreads remained narrow despite apprehensions about the economic outlook. The Bloomberg Barclays Global Aggregate Index (AUD Hedged) returned 0.4% for the month.
REIT’s (listed property securities)
The S&P/ASX 200 A-REIT Accumulation Index finished +5.3% higher in the month of April as the A-REIT sector rebounded from its negative first quarter. In a global context, G-REITs (as represented by the FTSE EPRA/NAREIT Developed Ex Australia Index (AUD Hedged)) ended April +1.9% higher. The Australian Infrastructure sector (As represented by the S&P/ASX Infrastructure Index) finished +2.3% higher in line with the A-REIT sector.
The Australian residential property market experienced an increase by +0.7% Month on Month (as represented by CoreLogic’s five capital city aggregate). Sydney was the biggest riser alongside Perth (+0.6%) also performing strongly. In contrast, Darwin (-1.2%) was the only city to regress during April.
10 May 2023
2023-24 Federal Budget: Highlights
On Tuesday the 9th of May, the Labor Government handed down the 2023-24 federal budget. The main themes of this budget were stated to:
- provide temporary and targeted cost of living relief;
- strengthen Medicare;
- focus on investments and measures that relate to renewable energy, with the goal of making Australia a renewable energy superpower.
The key highlights from the budget include.
- $20,000 instant asset write off – The Government has announced it will temporarily increase the instant asset threshold from $1,000 to $20,000 from 1 July 2023 to 30 June 2024 for small businesses.
- Energy Price Relief – The Government proposes to provide $1.5 billion over two years from 2023/24 to establish the Energy Bill Relief Fund to provide targeted energy bill relief to eligible households and small business customers.
- Medicare levy exemption – From 1 July 2024 eligible lump sum payments will be exempt from the Medicare Levy for low-income taxpayers who satisfy the eligibility requirements.
- Small business energy incentives - Deduction of an additional 20% of the cost of eligible depreciating assets that support the electrification and more efficient use of energy.
- Fringe benefits tax (FBT) - Amendments to the Electric Car Discount.
- The budget now forecasts a surplus of $4.2 billion with a cash deficit of $13.9 billion for 2022/23.
- Inflation is expected to remain at 6% for 2023-24 but is expected to fall to 3.25% in 2023-24 before returning to the target band of 2-3% in 2024-25.
- Unemployment is expected to rise to 4.25% in 2023-24 and then to 4.5% in 2024-25.
For more information on the budget announcements please read below.
- $20,000 instant asset write off – While the temporary full expensing measures will cease from 30 June 2023, the Government has announced it will temporarily increase the instant asset threshold from $1,000 to $20,000 from 1 July 2023 to 30 June 2024 for small businesses with an aggregated turnover of less than $10m. Additionally, the measures preventing small business entities from re-entering the simplified depreciation regime for 5 years if they opt out will continue to be suspended until 30 June 2024.
- Small business energy incentive – Small and medium businesses with an aggregated turnover of less than $50m will be able to deduct an additional 20% of the cost of eligible depreciating assets that support the electrification and more efficient use of energy. Up to $100,000 of total expenditure will be eligible for the Small Business Energy Incentive, with a maximum bonus deduction of $20,000. Eligible assets and upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
- Increase to Road User Charge – The current Road User Charge of 27.2 cents per litre for diesel will increase over 3 years to 32.4 cents per litre by 2025-26, leading to a reduction in fuel tax credit entitlements.
- Build-To-Rent Developments - For eligible new build-to-rent projects where construction commences after 7.30PM AEST on 9 May 2023 the Government proposes to:
- Increase the rate for the capital works tax deduction to 4% per year (ordinarily 2.5%);
- Reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments from 30% to 15%, to apply from 1 July 2024.
- PAYG and GST instalment uplift factor – The GDP uplift factor will be set at 6% (rather than 12% as would otherwise apply) for instalments with respect to the 2023-24 income year.
- Fringe Benefit Tax (FBT) – amendment to the Electric Car Discount – From 1 July 2025 the Government is proposing to sunset the eligibility of plug-in hybrid electric vehicles from the FBT exemption for eligible electric cars.
- Expanding the general anti-avoidance rule (Part IVA) – From 1 July 2024 the Government proposes to expand the scope of the general anti-avoidance rule in Part IVA so that it can apply to:
- Schemes that reduce the tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents; and
- Schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
- Implementation of a global minimum tax and a domestic minimum tax - The Government proposes to implement key aspects of the Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from digitalisation of the economy. These rules are intended to apply to large multinationals with annual global revenue of EU750 million (approximately AUD$1.2billion). This will include:
- a 15% global minimum tax rate for large multinational enterprises with the Income Inclusion Rule (IIR) applying to income years starting on or after 1 January 2024 and the Undertaxed Profits Rule (UTPR) applying to income years starting on or after 1 January 2025; and
- a 15% domestic minimum tax will apply to income years starting on or after 1 January 2024.
- Reforming the Petroleum Resource Rent Tax - From 1 July 2023, the Government will be capping the deductions to 90% of assessable PRRT income.
- Medicare levy exemption – From 1 July 2024 eligible lump sum payments (such as compensation for underpaid wages) will be exempt from the Medicare Levy for low-income taxpayers who satisfy the eligibility requirements including the requirements for the lump sum payment in arrears tax offset.
- Personal tax rates – There were no announcements in respect to changes in personal tax rates. As such it is expected that the stage 3 tax cuts will commence from 1 July 2024 as previously legislated.
- Increasing concessional tax treatment for carbon abatement and biodiversity stewardship income – The Government has announced that it intends to delay the start date of the biodiversity certification component of the 2022/23 March Budget measures titled Primary Producers – increasing concessional tax treatment for carbon abatement and biodiversity stewardship income from 1 July 2022 to 1 July 2024.
- The Government is proposing to provide an additional $1billion over 4 years from 2023/24 (and $268.1m per year ongoing) to strengthen Australia’s biosecurity system. To assist in funding these initiatives the Government proposes to add a biosecurity protection levy on Australian producers of agricultural, forestry and fishery products from 1 July 2024, set at a rate equivalent to 10 per cent of the 2020–21 industry-led agricultural levies, which is estimated to increase receipts by $153.0 million over 3 years from 2024–25. The levy is intended to recognise the benefits that primary producers derive from Australia’s biosecurity system, including detection, identification and response associated with invasive pests and diseases, maximising trade opportunities, and enhancing access to premium overseas markets.
- Increased taxation on super account balances above $3m – the Government has confirmed its intention to apply an extra 15% tax on total superannuation balances above $3 million from 1 July 2025.
- Payday super – employers will be required to pay their employees' super guarantee at the same time as their salary and wages from 1 July 2026.
- Energy Price Relief – The Government proposes to provide $1.5m over two years from 2023/24 to establish the Energy Bill Relief Fund to provide targeted energy bill relief to eligible households and small business customers, which includes pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients and small business customers of electricity retailers. It is intended that this plan will provide up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.
- Cyber security - The Government is proposing to provide $101.6m over 5 years from 2022/23 (and $11.8m per year ongoing) to support and uplift cyber security in Australia. This includes $23.4m over 3 years from 2023/24 to the Department of the Treasury for a small business cyber wardens program delivered by the Council of Small Business Organisations Australia, to support small businesses to build in-house capacity to protect against cyber threats.
Please note that the budget measures announced above will only take effect once they become law. To know more about how this budget will affect your financial position, please reach out to your Boyce Advisor.