Colen Garrow Quotations

It would appear that with revenue collection exceeding budget this fiscal year, additional tax relief may be forthcoming when Finance Minister Trevor Manuel unveils the national Budget for 2006/2007 on 15th February. Welfare and dependency grants, personal income tax relief, and cuts in those costs which would make housing more affordable for middle and low income earners are likely to buoy consumption expenditure, and manufacturing.

Fiscal relief may be the ammunition necessary to drive consumption expenditure but with it not being accompanied by aggressive monetary relief, growth in household consumption expenditure is showing signs of consolidation.

The stance the committee has taken probably provides a useful reminder that the easier interest-rate cycle has bottomed.

This has, however, since been replaced by a cycle of higher trending growth, underpinned by record confidence; the lowest consumer interest rates since 1983; almost R89bn in personal income tax cuts since 1995; and generally sound macroeconomic, monetary and fiscal stability.

Persistent currency strength has had a detrimental impact on export-based activities in the manufacturing sector, making similar imported goods more competitive.

In short, more South Africans employed suggests more disposable income and more money being spent on retail goods.

The manufacturing sector remains threatened by the persistent strength of the rand, although it should pick up from what looks to be a recovery in global manufacturing.

The irony is that it wasn't so long ago that South Africans were saying that the economy needs to grow at 3%. Now we're looking at 3,3% and saying it's dismal. It shows how the expectations have shifted.

The situation as it is, is thus inequitable and will have to be addressed by government at some stage.

Despite the odd shortcoming, this Budget is on balance good. It entrenches South Africa's good fiscal record.