Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Tuesday, 14 May 2013

What does today's budget deficit mean for Aussies?

Some interesting shortfalls coming to the fore in tonight's budget with large revenue write-downs totalling some $170 billion over five years.

The Mineral Resources Rent Tax (MRRT) saw a large portion of it written down from forward estimates (it hasn't been a success) and tax receipts saw a significant reduction on the forward estimates of some $60 billion.

This has been partly due to challenging global conditions and partly due to the punishingly high Australian dollar of recent times.

The good news is that the dollar has traded as low as 99.09 cents late today, which is as low as we have seen since June 2012.

The forecast budget deficit for 2013/14 is $19.4 billion, but the deficit is forecast to gradually decrease over the next couple of years before returning to a forecast surplus of $6.6 billion by 2016/17.

Contrary to what you might read in some parts, Australia's net government debt is relatively moderate as measured as against GDP - the level of net debt is forecast to peak at 11.4% of GDP in 2014/15. 

This is very low as measured against the group member nations of the major industrialised set, collectively known as the G7 (the US, United Kingdom, France, Germany, Italy, Canada and Japan), where net debt levels tend to be significantly higher.

Winners and losers

Who will the winners and loser from the budget be? Well, it won't be a good time to be a smoker (when is it ever these days, though?) with the price of a packet of smokes set to increase by a fair few cents as usual.

There didn't seem to be much in the way of compensation for the impacts of the Carbon Tax, a suggestion which had been mooted earlier in the piece.

Parents-to-be are set to miss out on the baby bonus as that is to be scrapped.

But it's a better time ahead for some others.

The budget offers support for disability care, school funding and a number of major infrastructure projects will see significant government spending in a bid to continue to stimulate construction activity. There will be new support for child abuse and cancer care, while farmers in hardship are set to receive assistance too.

Realistically, though, Labor is playing something of a "long game" here. Absent something dramatic occurring, the election is looking to be a big ask with the opinion polls very much against the party at this stage.

Personal finances

From a wider personal finance perspective middle-income families look set to lose out on some benefits going forward as the Government tightens its belt a little.

As I've alluded to here before, the foreseeable road ahead looks to be one of record low interest rates and there will be little in the way of rewards for savers.

But there is some better news.

Certain stocks such as the major banks are paying fully franked dividends which comfortably outstrip the saving rates on offer with inflation also remaining benign over recent months. And don't forget that dividends    can come with tax credits attached too.

Of course, some will say: "share prices might fall."

This is forever and always true but the focus of share investing should be on the ongoing sustainability of dividend income over the longer term not only a morbid fixation with stock price valuations.

Meanwhile, each set of lending finance data is beginning to rip upwards which suggests that certain property types in prime city suburb locations will see appreciably higher dwelling prices in the lead up to the 2013 election in September.