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The good times are roaring back for the Australian economy | TICKER VIEWS

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Bourke St Mall

Anyone else remember the good old days when it was exciting to wait expectantly for the Federal Budget to be released wondering what surprises good and bad there would be?

Well, 2021/2 was pretty much leaked/announced in the days prior and again last night was as boring as bat (even for us Chartered Tax Advisors!) to tune in to…

Big spending, big debts and no surprises which was pretty much a certain in an election year and a continuing pandemic recovery.

Melbourne's Bourke St Mall

Tax cuts were left in place, as was superannuation guarantees and the ATO has been held back in pursuing struggling businesses. Steady as she goes, keep the businesses running, employing and the people spending. 

YOU MIGHT ALSO LIKE – “We are better placed to meet the economic challenge”: Australia’s Federal Budget

“Net debt will increase to $617.5 billion or 30.0 per cent of GDP this year and peak at $980.6 billion or 40.9 per cent of GDP in June 2025

This is low by international standards. As a share of the economy, net debt is around half of that in the U.K. and U.S. and less than a third of that in Japan. 

Consumer sentiment is at its highest in 11 years. Business conditions reached record highs and more Australians are in work than ever before”

One thing they didn’t harp on about (and what saved us last time during the Howard years) is it appears, we are on the cusp of an extended resources / mining boom as the global economy fires back up on inflated incentives of all kinds.

Australia's iron ore helping the budget

We Australians really have won the lottery of life

Macro, there seems to be a growing diversion in economic realities. We either go bust on debt, or we go super boom and hopefully deflate debt.

It is getting harder to see a middle ground between the two polar opposites unless of course its decades (doldrums) of low inflation/interest rates and there’s no will or policy for that!

Housing nearly always gets some love with first home owners and single parent guarantees to help people get on board.

Superannuation with further good news

  • The super contribution works test for those aged 67 to 74 is to be abolished from 1/7/22
  • Downsizer super contributions restrictions from 1/7/22 get even easier also with an age restriction reducing to above 60 the take up of this will be far more attractive.
  • The $450 minimum per month super contribution is being removed from 1/7/22 a good thing for casual workers a pain for micro employers (administration).

The question has to be asked, why wait to 1/7/22 for these measures? 

Biggest news once again is in supporting business

Mr Frydenberg announced the government would be extending temporary full expensing and temporary loss carry-back (to the year 2019) for an additional year until 30 June 2023.

Sydney's CBD is attracting people back

Further, Mr Frydenberg said the government will deliver more than $16 billion in tax cuts to small and medium businesses by 2023-24 with around $1.5 billion flowing in 2019‑20.

This, he said, “includes reducing the tax rate for small and medium companies, from 30 per cent in 2014‑15 to 25 per cent from 1 July 2021″.

Well, that’s the 2021/2 highlights and there are plenty of other lesser budgetary gems that can all be found here: https://budget.gov.au/index.htm or contact the team at CIA tax.

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Money

President Biden cancels another $1 billion in student loans

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President Joe Biden’s administration will cancel another $1.2 billion in student loans.

This move comes as part of the administration’s ongoing commitment to addressing the financial challenges faced by many Americans in the realm of higher education.

The cancellation will primarily impact borrowers who were defrauded by for-profit colleges and those who attended schools that have since closed.

The new wave of relief applies to people enrolled in a repayment program known as SAVE and covers those who borrowed less than 12-thousand-dollars and have been repaying the money for at least 10 years.

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Money

Tooth fairy paying less for lost teeth linked to high inflation

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Even the tooth fairy is feeling the pinch of high inflation, according to a recent survey conducted by insurer Delta Dental.

The survey revealed that the average amount of cash left under children’s pillows by the tooth fairy (read: parents) dropped to $5.84 in 2023, marking a 6% decrease from the previous year’s average of $6.23.

This decline represents the first drop in tooth fairy payouts since 2018.

Even the loss of a first tooth, which typically commands a higher reward, saw a decrease in average gift value. Last year, the average gift for losing a first tooth was $7.09, down from $7.29 in 2022.

Tooth fairy generosity

The survey, which polled 1,000 parents of children aged 6 to 12, also found regional disparities in tooth fairy generosity.

Children in the western part of the United States received the highest average payouts, with lost teeth fetching an average of $8.54 in 2023, a notable 37% increase from the previous year.

Read more – why are fewer houses being sold in the U.S.?

In contrast, children in the Midwest experienced the sharpest decline in tooth fairy payouts, with the value of lost teeth plummeting by 36% to $3.63.

Similarly, children in the South saw a 16% decrease, with the average tooth fetching $5.51 compared to $6.59 in 2022.

Changing trends

The survey noted that the tooth fairy’s gifts historically correlated with the performance of the S&P 500, but this trend deviated in the past two years.

In 2022, despite an 18% decline in the S&P 500, the tooth fairy set a record high with an average gift of $6.23.

Conversely, in 2023, while the tooth fairy’s payouts decreased, the S&P 500 rebounded with a 24% gain, reflecting the resilience of the economy amidst challenges such as high interest rates and soaring inflation.

The survey results indicate that even the whimsical tradition of tooth fairy visits is not immune to the economic realities faced by households in an inflationary environment. As families navigate financial pressures, even the small joys of childhood may feel the impact of broader economic trends.

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Money

Stocks jump to record close as Nvidia sparks AI frenzy

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The S&P 500 and Dow Jones Industrial Average both surged to close at record highs on Thursday, fueled by a wave of investor enthusiasm for growth and technology stocks following Nvidia’s stellar earnings report and bullish outlook on artificial intelligence chip demand.

Nvidia’s shares (NVDA.O) skyrocketed after the chip designer projected a nearly three-fold increase in first-quarter revenue, citing robust demand for its AI chips.

The company’s performance surpassed expectations for fourth-quarter revenue, underscoring its position as a leader in the AI market.

The success of Nvidia’s earnings served as a litmus test for the AI-driven rally on Wall Street, particularly after the S&P 500 breached the 5,000-point milestone earlier this month.

Analysts had warned of a potential sell-off in technology stocks if Nvidia’s results fell short. However, the market responded with a surge, propelling both the S&P 500 and Dow Jones Industrial Average to record highs.

Significant gains

Unofficial closing data revealed that the Dow Jones Industrial Average climbed 456.54 points, or 1.18%, to 39,068.78, while the S&P 500 gained 105.14 points, or 2.11%, to 5,086.94.

The Nasdaq Composite also saw significant gains, adding 460.75 points, or 2.96%, to 16,041.62.

Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions, humorously remarked, “As Nvidia goes, so goes the world,” highlighting the company’s influence on market sentiment. Janasiewicz emphasized that Nvidia’s strong earnings dispelled doubts about the sustainability of the AI trade, suggesting further potential for growth.

Nvidia’s market capitalisation surge on Thursday surpassed Meta Platform’s historic $196 billion gain earlier in the month, solidifying its position as a market leader in AI technology.

Maintain its position

Market analysts predict that the S&P 500 will maintain its position above the 5,000 mark throughout the year, according to a Reuters poll.

Most sectors within the S&P 500 experienced gains, with technology stocks leading the charge.

The S&P 500 growth index recorded its largest daily percentage gain since November 2022.

In addition to Nvidia, other companies poised to benefit from the AI boom saw notable increases in their stock prices.

Advanced Micro Devices (AMD.O), Super Micro Computer (SMCI.O), and Arm Holdings all experienced significant jumps.

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