PITCHER PARTNERS NATIONAL 25 OCTOBER 2022:
The Government has failed to recognise the central role that business plays in providing employment, generating profits to fund government spending and driving innovation for long-term benefits in its Federal Budget.
The first Labor budget, and second for Australia in 2022, is focused on direct support for the Australian voter who is living through challenging times. Nearly all the announced initiatives are focused on support for families, through childcare and parental leave, affordable housing, education and improving aged care.
There were few new impediments to business in the Budget but programs that had been focused on the modernisation and transformation of middle market business are on the chopping block.
Nearly half a billion in savings made by cancelling or winding back manufacturing and business support programs.
But some businesses in key sectors, including agriculture and medical science, may benefit from more targeted support in a new $15 billion fund designed to ‘diversify and transform the Australian economy’.
Federal Treasurer Jim Chalmers announced savings of more than $300 million over three years for the partial reversal of the Morrison Government measure known as Modern Manufacturing Strategy and Critical Supply Chain Vulnerabilities.
Uncommitted funding under the initiative has been reversed and a third round of the Manufacturing Modernisation Fund has been canned, while nearly $200 million of uncommitted funding has also been taken from the Entrepreneurs’ Program, which was targeted at businesses with an annual turnover of $1.5 million to $100 million.
“At best, it could be said that this Budget stays out of the way of business,” Pitcher Partners National Chairman John Brazzale said.
“But there is little in the Budget for the businesses that have weathered financial storms across the last two years, and are likely to have to survive a significantly slowing economy in the coming 18 months.
“Business have been hit by cuts to programs that were designed to assist them to evolve and develop in the name of budget savings. The failure to maintain support for middle market business evolution will reduce Australia’s international competitiveness in the long term.”
It’s a sign of how little the Federal Budget offers business except in a narrow set of sectors covered by the new National Reconstruction Fund, which will seek targeted co-investments in resources; agriculture, forestry and fisheries; transport; medical science; renewables and low emission technologies; defence capability; and enabling capabilities.
In a sign of economic expectations for the coming 18 months, $15 million over two years will be used to extend the Small Business Debt Helpline and the New Access for Small Business Owners programs to support the financial and mental wellbeing of small business owners as they struggle through the slowing world economy.
At the same time, business will face a heavier burden of compliance. As in most Budgets, funding for ATO compliance activity has increased; this time through various programs to cost around $1.9 billion over the next four years and expected to increase receipts by approximately $5.3 billion in the same period.
While not yet enacted, another business policy to hit the chopping block relates to IP and other intangible assets, with the Federal Government reversing a policy that would have allowed faster tax-write offs for patents, copyright and in-house software. These are key incentives in a knowledge economy, a transformation that Australia is still pursuing.
Mr Brazzale said that this Budget points to the likelihood of more substantial changes in the May 2023 Budget.
“The absence of any substantive changes for business may be an indicator that the Federal Government is keeping its powder dry for reform that hopefully supports business and addresses the structural deficit,” he said.
“We would hope and expect that in May 2023 there is some clearer support for Australian business, international investment and a continued focus on growth and employment.”
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