Budget Watch: We’re all George Costanza now – Fat Tail Daily

The Australian government budget will be released at 7:30pm tomorrow.

And it will likely have major implications for investment taxation in Australia.

Right now, you might be feeling a bit like George Costanza — I certainly do.

Remember this scene from Seinfeld where George Costanza lays out the root cause of all his problems?

Source: TVGag

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I certainly expect major changes to the budget that are actively hostile to risk capital (small-caps and micro-caps) and aspirational people, both young and old.

The old and asset-rich will get soaked, while the young and asset-poor — well naturally, their taxes will largely remain the same.

Such is the concept of intergenerational equity.

There appear to be few carrots in Jim Chalmers’ budget toolkit — it’s pretty much all sticks.

The Australian Financial Review released this chart tracking proposed elements of the budget in coverage this morning:

Source: Australian Financial Review

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The budget will, of course, do limited “budgeting”.

Instead, I expect it to increase the burden of debt on future generations.

This budget will be the product of a “brains trust” that includes:

1. A Finance Minister who does not understand the difference between net and gross savings and;
2. A Treasurer that has a PhD in political science and a Wikipedia page that does not list any private sector experience of any type.

People of my age (35) and younger will have to pay for decades of government profligacy at federal, state and local levels in an economy that is likely automated, job-scarce and dominated by AI.

But it gets better-worse…

The government is already considering reaching into the superannuation cookie jar by directing it to do things other than maximise returns:

Source: Australian Financial Review

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So yeah, it’s pretty grim out there…

But maybe not here?

On Thursday, I’m off to a prominent invite-only investment conference in the Victorian countryside.

It will be mostly small cap mining types, who, from my recent experience, are quite buoyant.

Especially if their assets reside outside Australian borders.

This is the recurring theme I’ve been banging on about — don’t invest in Australia per se, invest in Australian companies that do business outside of this country.

Australians are a great, ambitious and clever bunch of folk.

When they get their teeth stuck into a Peruvian gas asset, a Brazilian rare earths project or a future African lithium mine, they can do incredible things.

And there’s a lot of talk about how this budget could favour dividend stocks heavily.

But perhaps, just maybe…

In a roundabout way, maybe the tax system for investments will be so punitive that it won’t favour boring dividend stocks at all?

Maybe people will throw caution to the wind even further…

They might even go for the real “swing for the fences” type stock market winners out of pure nihilism.

Who knows?

All we can do is hope.

Shut up, George.