Even if you have little interest in politics or economic issues, it's hard to avoid knowing that it is Federal Budget time. The media is full of lead-up news, speculations and the usual pre-budget reveals. For those not overly familiar with the annual fiscal fest and possibly confused over the timing, we explain. Yes, the 2020/21 budget was delivered last October. But, it was delayed from the scheduled May timing due to the coronavirus pandemic. The Government felt the timing was not good to try to anticipate in May, the full impact of the pandemic on the economy and hence plan 12 months in advance. So with many of the measures introduced in October still in play, the scheduling means a shorter timeframe between the 2002/21 and 2021/22 budgets.
While economic analysts and commentators talk about deficits and fiscal strategies, for those considering buying a motorcycle, the key ‘want to know’ is how might the budget outcomes affect my new motorbike loan? Specifically, interest rates and affordability. At Jade Bike Loans, we provide this broad overview of the budget to build your knowledge bank and clarify any queries you may have about your loan.
The Budget and Interest Rates
The Federal Budget is developed with policies and measures by the Government of the day. In this case, the Treasurer, Josh Frydenberg in consult with the Finance Minister, Simon Birmingham are tasked with delivering this year’s budget. In simple terms, the budget addresses government income and expenditure – where and how they will derive income by way of taxes including income tax, GST and company taxes and other sources and what they will spend money on. The measures and strategies in the budget are known as fiscal policy.
Interest rates are the domain of monetary policy which is largely determined by the Reserve Bank of Australia. The RBA sets the official cash rate from which individual lenders then set their rates for lending and savings.
The Government and the budget measures do not directly set interest rates. But, indicators and performance in certain areas such as unemployment, inflation and overall growth in the economy are affected by the budget and in turn are the major considerations by the RBA in cutting or increasing interest rates.
2021/22 Budget Overview
So in the budget being announced on 11 May you won’t hear the Treasurer making changes to interest rates. He has stated that the focus will be on jobs and growth. Josh Frydenberg delivered his traditional pre-budget speech on 29 April which outlined the strategy and approach without too much specific detail on the measures. Following that speech, reveals start to appear with details on key measures.
With the focus on creating jobs, the strategy is to drive down unemployment. Unemployment is a key consideration for the RBA’s interest rate decisions along with inflation. Neither of these is nearing the RBA’s target levels.
With the Government facing a record deficit as a result of the massive spending in the 2020 stimulus packages, it was widely speculated whether they would focus on addressing the deficit in this budget. The Treasurer has clearly stated that the focus is on repairing the economy first not repairing the budget.
What could be in the budget for you?
What’s in it for me is what many people look for when the budget is announced. While we await specifics on 11 May, some ‘gains’ for individual taxpayers are already known. In the October budget, the Government brought forward tax cuts for individuals. Tax cuts had already been legislated to come into effect over the coming years. With the pressing need to stimulate the economy by putting money into the pockets of consumers, the next stage of those tax changes was brought forward. Tax cuts for some income brackets were announced in October and backdated to 1 July 2020.
When individual taxpayers starting receiving the tax cut depended on when their employer installed the new tax schedules into their payroll systems. But there was still the backdated July-October tax cuts to be received. That’s where you could be a winner and what might make your planned motorcycle loan more affordable.
Any tax cuts you were entitled to from 1 July to when your employer implemented the new schedule will be accounted for when you submit your annual income tax return. So eligible taxpayers should receive a tax refund this year. How much will depend on your tax bracket?
For low and middle-income earners there is another gain with the tax offset for this income bracket extended for another year. This is the $700-$1080 you may have received last year.
One measure which has been revealed is an increase in child care subsidies for parents/families earning less than $130,000 pa and have two or more children 5 years or under in childcare. The subsidy increases the current 85% maximum to 95% for eligible parents. This could mean cost savings in your household budget!
Motorbike Loan Affordability
Affordability is about both sides – income and costs. Increasing your income or reducing your other costs. Both the gains on your income tax and the possible reduction in childcare expenses could make repayments on a bike loan more attractive and affordable.
At Jade Bike Loans we focus on always achieving the cheapest bike loan interest rates to make our motorbike loans the most affordable for our customers. To see how affordable, use our motorbike finance calculator. And keep an eye and ear on the news to see if you could be in line for any further gains in the budget.
For an affordable loan call us on 1300 000 003
DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA ARE PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
