Tonight’s federal budget delivers enough for businesses to keep them sailing along as the economy becomes more buoyant, but it lacks great vision for the direction of the country, instead locking in previous budget measures as business as usual.
National Chairman of the Pitcher Partners National Association John Brazzale said tonight’s Budget has been built on the backdrop of an ongoing global pandemic with the next federal election in sight.
“This Budget has focussed on continuing to support the economic recovery through big ticket spending on infrastructure and targeted support for industries. However brave structural moves — a more rapid reduction to corporate tax or initiatives to fuel business and new industries growth — have been left on the shelf,” Mr Brazzale said.
“Australia prides itself on being a developed economy but looking at the industries represented by many of the largest businesses in our economy, we are heavily weighted to traditional industries of finance and materials. This is much more so than our peers in the USA and Europe, where technology, communications services and biotechnology represent much larger parts of the business community than they do here in Australia.
“With borders up and the economy locked, Australian middle market businesses need a plan that will deliver the skilled workforce and incentives to invest and grow.
“Australia’s borders are not expected to re-open until at least mid-2022, which means immigration and international tourism are still off the table, as are most international student arrivals.
“Immigration and international students are important, not only for the industries and businesses they support through their spending, but are critical for labour supply in many industries if we are to make the most of the expected economic bounce the Budget seeks to support.
“This Budget has rightly left business to do the heavy lifting of bringing the economy back to recovery, but, without the necessary structural reform needed for the decades to come,” Mr Brazzale said.
There are some concessions aimed at the middle market, including:
- 12-month extension of the loss carry-back offset introduced in the 2020-21 Budget, allowing corporate entities to carry back tax losses for the 2022-23 income year for up to four income years
- Extended instant asset write off
- Consumption stimulus through the extension of the low and middle-income tax offset
- Tax relief for small brewers and distillers, which includes increasing the excised refund cap from $100,000 to $350,000
“We look to the future with cautious optimism. However, the Budget forecasts are predicated on a complex set of assumptions. Invariably, these will be concerned with fundamentals such as growth, core commodity prices and general trading conditions,” Mr Brazzale said.
Mr Brazzale said that the Government could have looked to lift education outcomes with a view to evolving the economy to be able to innovate; enacted long-term tax reform that encourages research and rewards outcomes, and foster import replacement industries by encouraging local production such as advanced manufacturing.
“As we have seen with both the strong rebound in employment and the vaccine rollout, expectations of timelines are changing rapidly, and these will continue to have large impacts on short term budgets and economic conditions.
“Staying flexible, efficient, and productive will be as important as ever for the middle market in the year ahead.”