Middle market businesses continue to pull more than their share of economic weight in the Australian economy over the last 12 months as the economic landscape continued to shift and pivot in a fluid financial system.
With the 2023 Federal Budget rapidly approaching, we provide our wish list of budget inclusions that will assist the engine room of the Australian economy to lead the way. These measures are critical to maintaining an economic environment that is predictable and reliable as we fight the headwinds of a slowing domestic and international economy.
Fiscal responsibility must be the focus
No one will deny that in recent years government spending initiatives have assisted to shelter the economy from significant distress through the pandemic. However, at some point the piper must be paid. The government debt burden is as high as it has been in living memory and must be managed. Arguably, government spending, while necessary, has contributed to the current inflationary cycle – particularly within construction inputs associated with infrastructure projects. The budget must now be brought into balance, setting a tone for the broader economy, businesses and households, to ensure the period of sustained higher interest rates can be managed through and the debt burden reduced.
There exists several measures, currently slated to end, that should be extended without a permanent cost to the budget but bringing real benefits to mid-market businesses and supporting the maintenance of economic activity. For growth and activity stimulus and supporting business to continue investing, extending temporary full expensing measures will accelerate asset write off benefits.
For business with cash flow challenges in a difficult economic environment, extending the loss carry back provisions will allow for the recovery of previous paid taxes to supplement working capital in business suffering temporary losses.
Start-ups and construction business need more support
Several years ago, the government developed early stage investing tax concessions to stimulate the Australian start-up environment. Arguably much of the traction and the big bang from these concessions was lost with the intervention of the pandemic. Australia must continue to be encourage and foster start-ups, and extend the existing program to increase the attractiveness to investors to fund higher risk ventures. This is particularly important now as capital markets tighten and constrained start-ups are growing only by their own toil.
In the past 12 months construction businesses have made up the highest proportion of company collapses, at almost 9 per cent. Now is the time for the Federal Government to give back to the sector through targeted spending while the investment cycle slows for developers. There is a critical need for social housing across Australia, developers stand ready to support a new ‘big build’, while other projects are delayed. An extension of the existing program will support these businesses, keep Australians employed on building sites and sustain an industry until private investment returns.
Businesses need to arm themselves with skilled workers
Australian workers should never be displaced, but for the skills or workers that don’t exist locally, there must be a more streamlined visa process to bring in migrants who possess the necessary proficiencies.
Far too many skilled people come to Australia to live and work, only to be told they are unable to work in their chosen profession because their qualifications are not recognised. Many more are unable to even reach our shores, powerless to breach the walls of immigration red tape supposedly in place to protect Australian jobs.
Right now, Australia’s economy is flowing but it won’t always be the case and cost of living pressures are already slowing discretionary spending. When the inevitable drying up occurs, it will be critical to draw on local content.
Allowing business to arm themselves with the right skills now will build resilience against downturns and ensure Australian business can deliver in times when it will be needed most. Better support for skilled and targeted migration adds capacity and allows businesses to remain in our supply chains and service delivery. That sort of investment doesn’t add pressure onto social security or takes jobs away from local people but it does support business and helps put extra money into the economy where it is truly needed.
Stimulate SME economic activity through SMSFs
Finally, on behalf of all self-funded retirees, and those aspiring to be such – leave superannuation alone. Successive governments have tinkered and meddled with the superannuation system, for various reasons, always undermining and diminishing the ability of the program to achieve its key goal – to enable taxpayers to sustain their own lifestyle in retirement without the support of the government. The changes are often retrospective, shifting the goal posts previously set, and almost always lessening the nest egg being accumulated by hard-working Australians.
We are told Australia sits on the threshold of a potential recession, and certainly an economic slowdown. The various levels of government are burdened by significant debt, likely to impede their ability to lean into the economy to counter an economic contraction.
It makes sense to look to alternate sources for stimulus, and one source could be the billions locked away in superannuation, and particularly allowing the wealth accumulated in Self-Managed Super Funds (SMSF) to be harnessed for the mutual benefit of Australia and the fund members.
Could the rules for investing by SMSFs be revised to stimulate Australian economic activity through providing capital to the many associated SME businesses? Acknowledging that the investment risk to SMSFs need to be reduced, such advances could be fully secured as appropriate to control the risk to the members. It is worth considering.