1. Inflation and interest rates
- Budget outcome: For now the Reserve Bank mandate is largely unchanged, and is unlikely to change soon
- What does this mean for the consumer? Consumers must watch their spending and incur debt responsibly because it is unlikely (although not impossible) that we’ll see the interest rate cut again.
2. Tax reductions
- Budget outcome: The National Treasury has slightly increased the tax burden through so-called “bracket creep” (when inflation pushes income into higher tax brackets).
- What does this mean for the consumer? This is the best outcome that taxpayers could have hoped for, but they should still take heed of the warning that tax increases may have to go beyond bracket creep next year. So consumers need to think in the long term and remain responsible with household budgeting, particularly for longer-term commitments. Paying as much as possible on cars and bonds this year would be a good idea because income could be less next year if tax increases.
- Budget outcome: Unfortunately for consumers there is a proposed increase on petrol tax of 25,5 cents a litre, implementation of a carbon-emissions tax on new cars, and consumers will pay 6,5 cents more for a beer, 12 cents more for a bottle of wine and R1,24 more for a pack of cigarettes.
- What does this mean for the consumer? Consuming energy is turning into the next sin tax, given the increases in fuel tax and emissions. This will hurt the pockets and may see the investment in public transportation pay dividends, most notably the Gautrain. The emission tax (which will impact almost all vehicles on the road) will only apply on the sale price of new vehicles — this again makes a good case for buying a second-hand car.
4. National Health Insurance
Budget outcome: While the timeline for the introduction of National Health Insurance (aimed at better access to healthcare for all South Africans) is given as five years, it may happen later. It is encouraging to see that the government plans to tackle the health challenges in South Africa in partnership with the private sector, which means that we’ll see a migration of existing healthcare systems to a new system, rather than the introduction of a totally new healthcare dispensation.
What does this mean for the consumer? In the foreseeable future, it remains business as usual, so consumers must provide for their medical needs via private medical aids (the government is not going to come to the rescue). It will also be sensible and prudent to plan for medical expenditure in the future (for example, post-retirement medical funding) based on the current healthcare dispensation.
Anton Gildenhuys is chief executive of Sanlam Personal Finance