The Australian share market gave up some recent gains in the month of May, with the All-Ordinaries index falling 3.0% for the month and closing at 7,273.5 points. The Australian Dollar continued to slide, falling by 2.1% for the month, with 1 Australian Dollar buying 64.8 United States cents.
Global share markets returns were generally weaker, with the United States Dow Jones Index falling 3.5%, the London FTSE falling 5.4%, and the Hong Kong Hang Seng Index falling 8.3% for the month. The Japan Nikkei 225 Index was the outlier, gaining 7.0% in May.
The Reserve Bank of Australia (RBA) Board shocked the market, increasing the official Cash Rate by a further 0.25% per annum in May. The official Cash Rate now stands at 3.85% per annum, and a surprise jump in inflation to 6.8% in April from 6.3% in March (as shown in the chart below) has increased the chance of further short-term rate increases.
Earlier in the month, Treasurer Jim Chalmers handed down his Federal Budget for the 2023/24 financial year. Following the pattern of the last few Federal Budget announcements, “Budget night” contained little by way of surprises, with many of the spending initiatives and broad Budget position known in the weeks and days leading up to the official release.
Promoted as the “Stronger foundations for a better future” Budget, Labor continued to promote its theme of spending restraint and responsible economic management – with a key focus on targeted cost-of-living relief, the transition to renewable energy, and bolstering targeted spending on Medicare and the care sectors.
The cornerstone cost-of-living relief announcement was funding to reduce the impact of rising energy prices on Australian households and small businesses. This will be in the form of up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses. These include:
- Commonwealth Seniors Health Card holders
- Family Tax Benefit A and B recipients
- Small business customers of electricity retailers.
The energy bill relief will not be a direct payment to people and small businesses, rather it will be a rebate that is applied to reduce the cost of electricity for eligible households and small businesses, and be paid directly to the energy retailer. This measure is due to commence from July this year.
For superannuation, announcements were focused on aligning employer Superannuation Guarantee payments with pay cycles and the introduction of the previously announced tax on earnings attributable to balances in excess of $3 million.
There was no announcement to change legislated ‘stage 3’ tax cuts, although a number of tax strategies were proposed to support small businesses and increase the number of dwellings available on the rental market.
For more information, please contact Ryan Love on 1300 856 338.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation, and investment objectives.