The financial and real estate sectors should benefit from an extended period of low interest rates. A smaller deficit suggests that the Reserve Bank of Australia can keep its official interest rates on hold until 2015. Low interest rates will boost demand for borrowing for home purchases and for business investment.
An unintended consequence of the budget has been to dent consumer confidence. This is not good news for the retail sector which, prior to the budget, had seen some recent improvement. Five years after the global financial crisis, consumers were beginning to loosen their purse strings. Some of those purses are now shut as we await the outcome of the political wrangling over the budget’s final shape.
The mining sector saw some negatives in the budget. It expects the carbon tax and the mineral resources rent tax to be repealed but this is proving difficult given the make-up of the Senate. Ongoing global economic growth will assist the mining sector although lower prices for some commodities has become a concern.
There was little in the budget to excite the pharmaceutical sector. Margins look set to be squeezed and, after 1 July next year, there are likely be greater calls on the time of pharmacists as patients seek out the pharmacy as their first point of medical assistance.
The budget was not a game changer. If it helps put Australia’s books in better order and lifts national productivity via the provision of better infrastructure we will all be better off.
If nothing else, the budget has started a conversation about the future structure of taxation and spending. It may even lead to an increase and widening of the GST. In the meantime, all industries and all individuals will need to think creatively about how to survive and thrive in the current competitive environment.