Budget News. Budget will boost confidence, but higher growth is the key!
Probably the best news to come out of today's Budget is that the government will no longer be providing bailouts to the State Owned Enterprises that have been hollowed out by corruption, incompetence and financial mismanagement.
These organisations have been a massive drain on the economy - and on the pockets of ordinary South Africans - for far too long, and we believe the 'tough love' now proposed by the Finance Minister will give public confidence a huge boost.
This positive sentiment should be further buoyed by the news that there will be no fuel tax increase in April, that most employees will have to pay less tax in the coming year and that the unemployed will continue to receive the social distress grant.
This will be good for the residential real estate market, while the commercial market will no doubt also be positively affected by the decision to lower the corporate tax rate from 28% to 27% and by government's plans to underwrite small business loans and actively promote more public-private partnerships to speed up the urgent repair and development of SA's road, rail and water networks.
However, we all know that the real key to the future of the property market in SA is the systematic reduction of unemployment, and that can only be achieved in an environment of strong economic growth. So it is disappointing that GDP is only expected to grow by 2% or less for each of the next three years. Government will simply have to do more to encourage - and enable - the local and foreign investment in SA that is needed to up this growth rate and speed up job creation.
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