With current economic situation of supply chain issues, rising costs of living emerging everywhere, skyrocketing fuel prices, the Ukraine situation, the flood situation and the uncertainty of the COVID-19 pandemic still apparent, Government announcements around policy and measures can be worth staying across. The Budget is one of those announcements which is always of importance to both individuals and business owners. But as the Budget deals with the finances of the entire country, does it have any effect on caravan finance and an individual caravan loan?
The Federal Budget does not address lending and interest rates directly through measures per se. It is the remit of the Reserve Bank of Australia (RBA) to set the official cash rate. From that point it is up to individual banks and lenders to establish the interest rates they choose to attach to their portfolio of loans. ASIC is charged with the responsibility for consumer finance.
But the Federal Budget which is the Government’s fiscal policy, is designed to a specific effect on different aspects of economy. The 2022/23 Federal Budget focuses on inflation and unemployment. These are economic indicators that the RBA assesses when making decision on interest rates. So there can be an indirect or flow-on effect from budget measures to the lending sector.
Measures announced in the budget also include tax benefits which can be realised through acquisitions which relate to finance.
We summarise key aspects of the Federal Budget announcement for 2022/23 and outline how the measures may impact interest rates on caravan finance.
2022/23 Budget Overview
In the evening session of the House of Representatives on Tuesday March 29, Federal Treasurer Josh Frydenberg ‘brought down’ the Government’s budget for financial year 2022/23. The timing is earlier than usual due to the timing of the May Federal Election.
In the opening remarks of his budget speech, Mr Frydenberg noted the events and conditions which were causing negative impacts on the Australian economy including Russia invading Ukraine, the flood crisis in NSW and Queensland and the ongoing COVID-19 pandemic.
As positives, the Treasurer pointed out that Australia’s pandemic recovered was faster and was stronger than countries such as the UK, Japan, Germany and the USA. He noted how unemployment had fallen to 4% which was the lowest figure in 48 years. The Budget Papers also state that the budget as presented would further lower that rate.
Key Measures Announced
Both the Prime Minister Scott Morrison and the Treasurer had described this year’s Budget prior to the official announcement as a ‘cost of living’ budget. The focus was on immediate relief for pressures of the rising costs of living and to present an economic plan which would create even more employment and jobs.
The biggest relief for motorists, business owners and caravanners will be the temporary, 6 month, reduction in fuel excise. The excise is 44c/litre and will be cut to 22c/litre from the night of the budget for a 6 month period. The measure is designed to give households immediate relief from the soaring petrol prices. Oil prices are governed by global events so the actual pricing is not wholly within the Government’s control.
For caravan owners looking to head off on tours and holidays and those currently considering a purchase, having to pay less at the pump will no doubt be extremely welcome.
The other big win for individual taxpayers that earn $126,000 or less is an additional $420 to the Low and Middle Income Tax Offset. The increase lifts the maximum to $1500. The amount applicable varies across the income scale. This is not an immediate handout of cash. This is a tax offset. Meaning when the personal income tax is submitted to the ATO the relevant offset amount is deducted, reducing the taxable income. In many if not the majority of cases, that can mean a significant tax refund. So the faster you get your tax return in the faster you will receive your share.
Small businesses are in line for a number of key measures including reducing the company tax rate to 25% from 30% and tax benefits for spending on digital tech and training.
Wages subsidies and apprenticeship funding is also included. Changes to the Home Guarantee Scheme and to the First Home Super Saver Scheme are included to assist those seeking to get into the housing market.
More medicines have been added to the PBS which may further ease costs of living.
Businesses receive a range of support by way of schemes and new work opportunities through Government spending on infrastructure, innovation and other measures. To read the full details of the announcement to see what benefits you may be entitled to, refer to the Budget Paper.
Budget and Caravan Loan Interest Rates
As noted above, the Budget does not set or alter interest rates. But the RBA has targets for both inflation and unemployment in order to trigger a rate rise. The measures in the Budget are designed to push unemployment lower, closer to the RBA’s target. How these changes might influence caravan finance rates in the future is something prospective buyers should watch closely.
Inflation is rising and together with the current unemployment figures, is indicating a rate rise could be on the cards very soon. While some Budget measures will not be implemented until the Budget Bill is passed and the new financial year commences, the RBA could move on rates in any month.
The implementation of the Budget will also be dependent on the outcome of the Federal Election. Regardless of all those events, those considering a caravan purchase with finance would be wise to make their move before the RBA moves to ensure they secure the cheapest interest rate loan.
Contact Jade Caravan Finance on 1300 000 003 to discuss caravan finance
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.