Amidst the festive season, restrictions being eased and in the same week that cases of the new Omicron variant of the coronavirus soared in several states it was time for mid-year budget updates. The Federal Treasurer Josh Frydenberg and NSW Treasurer Matt Kean both delivered mid-year updates on the budgets they delivered earlier in the year. It was a busy week with plenty of information to digest, process and form a view what it all means for individuals and businesses. We provide a summary of the latest budget updates, Omicron and interest rates from the motor vehicle and general lending perspective.
MYEFO: Federal Budget Update
Under the official Charter of Budget Honesty, the Federal Government is required to release a mid-year update which is titled Mid-Year Economic and Fiscal Outlook with the acronym MYEFO. This report updates on the fiscal and economic outlook as well as taking account of decisions which have been made by Government since the Budget release. Decisions which affect receipts and payments and as such revises the aggregate values in the Budget.
The 2021-22 MYEFO document runs to 428 pages for those who are interested in the full detail. For those more concerned with the basics, here are some key take-outs:-
- Prior to delivering MYEFO, Treasurer Frydenberg described the economy as ‘primed for lift-off’ in 2022.
- Despite rising cases numbers, he said there were encouraging signs about the nature of Omicron and it could be expected that the economy would rebound, unemployment would continue to fall and restrictions would continue to be eased.
- International borders would allow skilled workers and international students to return to fill job vacancies, a problem which has been plaguing the recovery for many industries.
- MYEFO forecasts unemployment at 4.5% in 2022 and 4.25% by the June quarter in 2023.
- Increase in tax revenues will contribute to reducing the deficit over the next 4 years.
- Australia well-place to deal with pandemic challenges with high vaccination rates and economic outcomes. But the new variants pose risk to fiscal and economic outlooks.
- 75% growth in real GDP expected 21/22 and 3.5% in 22/23
- Government addressing shortages in the workforce with a number of target measures.
Dr Philip Lowe, Governor of the RBA, was also delivering a speech on the same day as MYEFO and made comments around the impacts of the Omicron variant. Dr Lowe’s comments are significant for lenders as the RBA is tasked with setting the official cash rate which then of course flows onto the interest rates on car loans.
Dr Lowe acknowledged and cautioned that the new variant did present a risk but that he expected the positive momentum in the economy to continue through coming summer months. This he said is underpinned by the high vaccination rates, opening up and the good balance sheets of households and their ability to spend.
As far as a possible increase in the cash rate as the US Federal Reserve is tipped to do in 2022, Dr Lowe once again played down that possibility. Saying the RBA was waiting for that sustained level of inflation in the 2-3% range and that was not expected to be achieved in 2022.
NSW Budget Update
As the largest state economy and after a winter of lockdowns, the performance of the NSW economy is extremely significant. NSW Treasurer Matt Kean also delivered a half-yearly budget update on Thursday 16 December, revealing the major impact that the extended lockdown over the winter has had on the financial position of the state.
Jobs is an important factor to many businesses and Mr Kean said it was expected that by first quarter 2022 the jobs lost during the Delta outbreak would be recovered and new jobs created. The debt/deficit has increased significantly but the economy is expected to bounce back over coming months.
While these mid-year fiscal and budget updates don’t have a direct impact on the best business car loan rates being offered on motor vehicle finance – the key focus at Jade Car Loans as a lender, the outlook for the economy can be significant for those considering investing in new vehicles.
One of the major issues holding many businesses back from bouncing back has been workforce shortages. The measures announced in MYEFO may mean better times ahead for your business and a sign that now is the right time for those new vehicles. If financing is a consideration, low doc car loans can be a suitable option for many businesses.
For individuals, the prospect of an improving jobs market and economy can also present a reason to move on your new car purchasing plans. The prospect of more reliable and continual work and solid income moving forward, can improve the car loan application and present better prospects to achieve a cheaper car loan interest rate.
Amidst all the positivity, an issue which remains as the ‘elephant in the room’ is issues with the global supply chain. Omicron is causing some European countries to reinstate restrictions and the rising case numbers have the potential to cause factory and manufacturing short-term closures in these regions and further delays in goods such as cars reaching Australian market.
To move on your car purchase now, request a quote and arrange a pre-approved car loan.
Contact Jade Car Loans 1300 000 003 for new car finance.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.