Winter 2021: Economic News

It’s June which means winter has officially arrived. As we rug up and spend more time indoors, it’s a perfect time to get your financial house in order as another financial year draws to a close. And what a year it has been! The local economic news in May was dominated by the federal Budget, and much better-than-expected economic data.

Australia’s budget deficit is smaller than expected just six months ago, at $177.1 billion in April. This was underpinned by rising iron ore prices, up 22% this year, and higher tax receipts from more confident businesses and consumers.

The NAB business confidence and business conditions ratings hit record highs in April of +26 points and +32 points respectively. New business investment rose 6.3% in the March quarter, the biggest quarterly lift in nine years.

Housing construction is also going gangbusters, up 5.1% in the March quarter while renovations were up 10.8% thanks to low interest rates and government incentives.

Retail spending is also recovering, up 1.1% in April and 25.1% on a year ago. The ANZ-Roy Morgan weekly consumer confidence index rose steadily during May to a 19-month high of 114.2 points, well above the long-term average.

As a result of the pick-up in economic activity, unemployment fell from 5.7% to 5.5% in April.

In response to all this, the Reserve Bank lifted its economic growth forecast to 9.25% for the year to June and 4.75% for calendar 2021. If realised, this would be the strongest growth in 30 years, albeit rising out of last year’s COVID recession.

The major sticking point remains wages. Wage growth was 0.6% in the March quarter but just 1.5% on an annual basis, below inflation. The Aussie dollar finished May at around US77c after nudging US79c earlier in the month.

50% Pension Drawdown Requirements

Prime Minister, Scott Morrison has recently announced that the temporary rule change, reducing the minimum superannuation drawdown by 50%, has been extended until 30th June 2022.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.