Australian Election 2019: Impact on the Economy
PM Scott Morrison has secured his third term in office for the Coalition with an unexpected victory after voters rejected the Opposition’s policy agenda. Australian stocks have risen to their highest levels since 2007 because of gains in financial services and consumer-focused sectors. Investors and CEOs are relieved from Labor’s plans to cut tax incentives.
Developers may experience gains now that the threat to tax breaks for property investors has been lifted. The Coalition does not plan on changing negative gearing, which allows owners to claim rental property and mortgage interest costs. The government also pledges support to first home buyers so they would only need 5% of the purchase price as a deposit rather than 20%, which banks typically demand.
Shorten had a more complex and policy-heavy campaign about tax reform and focusing on climate change solutions. However, it did not resonate well with most Australians. Morrison had a simple campaign that focused on economic growth and keeping taxes low.
The return of the Coalition government means the return of the status quo for Australia. Investors and businesses no longer need to worry about the impact of the Labor Party’s proposed changes to taxation scales, franking credits and negative gearing. The removal of the uncertainty on possible tax changes may provide sharemarket support and allow businesses and consumers to resume investing, hiring and spending.
Taxpayers who are earning up to $126,000 a year will receive a tax cut resulting in more than 10 million taxpayers benefiting from this relief, which is expected to be available at the end of the 2018-19 tax year. Starting 1 July 2022, the Government will preserve the tax relief from the larger low and middle income tax offset by increasing the top threshold of the 19% tax bracket from $41,000 to $45,000 and the low income tax offset from $645 to $700. If it holds onto government, the Liberal Party will reduce the marginal tax rate from 32.5% to 30% in 2024-25 and will do away with the 37 per cent rate, resulting in a flat 30 per cent tax rate for anyone earning between $45,000 and $200,000 thus improving incentives for working Australians. Contact your accountant for more details.
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With the elections now over and new spending promises made – a much needed stimulus to the economy and housing market is needed to lift the current lack of momentum. Inflation remains low; wage growth slightly higher. The Liberal Party plans to create 1.25 million more jobs in the next five years, maintain budget surpluses and pay down Labor’s debt, provide tax relief to families and small businesses, increase investments for schools, hospitals and roads and keep the borders safe and secure for Australians.
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