In the wake of a once-in-a-century pandemic, Federal Treasurer the Hon. Josh Frydenberg delivered an important Federal Budget that provides strong foundations for the recovery of the Australian Economy post Covid 19.
As the dust settles on the pandemic, the economic damage wrought on the Australian economy has become clear. The Budget Papers forecast that net national debt will increase to $617.5B (or around 30% of Australia’s GDP) by 30 June 2021. It is forecast to peak at around 41% of GDP in June 2025 as a result of forecast deficits through to the 2024-25 financial year and beyond.
“While these figures are somewhat concerning, Australia’s net debt as a share of the economy is good by world standards. It is half that of the UK and the US and about a third of highest ranked Japan”, said ACAPMA CEO Mark McKenzie.
“The low global interest rate environment is also helping. As a result, Australia’s interest payments on this larger national debt is expected to be lower than occurred in the period immediately following the 2009 Global Financial crisis”, added Mark.
One of the statements made by the Treasurer late last year is that the Morrison Government would seek to ‘grow our way’ out of the economic downturn, as opposed to ‘taxing its way out’. In handing down the Budget on Tuesday night, the Treasurer has delivered on that promise.
“Of most relevance to our members is the fact that the Treasurer extended the business tax benefits that had been introduced during the pandemic last year. This means that businesses will be able to keep more of their post-pandemic income as they seek to replenish the cash reserves destroyed by last year’s economic downturn”, said Mark.
These measures include a reduction in the tax rate for small and family businesses (i.e. businesses with annual turnovers of less than $50M) to 25% from 1 July 2021. In addition, the provision for instant write-off of asset purchases in the year of purchase for tax purposes has been extended for a further year to 30 June 2023. The temporary loss carry back has also been extended for another year to include the 2022-2023 financial year, which means that any losses in the past year can be carried through to the financial year ending 30 June 2023.
“These are important measures designed to provide businesses with the opportunity to get back into their pre-covid position quickly and/or free up funds to invest in asset replacement and business growth”, said Mark.
Fuel businesses, like all businesses, realise benefits when our economy is thriving and government investment in public infrastructure is strong. Quite apart from the fact that the Australian economy has emerged from the pandemic in a stronger position than most expected, the 2021 Budget includes increased investment in public infrastructure. This investment is important to our recovery as it generates jobs and business activity that flows on to other businesses.
The Treasurer announced an additional $15B in new infrastructure projects that builds on the $110B, 10-year national infrastructure programme that is already in place. These new investments include projects such as:
- The new North-South corridor in South Australia
- The Great Western Highway and Newcastle airport upgrade in New South Wales
- A new intermodal freight terminal in Melbourne (Victoria)
- Major upgrades to the Bruce Highway in Queensland
- The METRONET public transport project in Western Australia
- Stage 2A of the Light Rail system in Canberra
- A major upgrade of the Midland Highway in Tasmania
“These projects, coupled with the large number of infrastructure projects already announced, will generate an increased level of national construction activity that should benefit fuel businesses in all Australian States and Territories”, said Mark.
The Budget also included record investment in skills and training to help those who had lost their jobs during the pandemic by equipping themselves with the skills they need to get a new job and keep it. Importantly, the government announced that it would work with Job Active providers to increase investment in measures designed to better match job seekers with available jobs.
We are hearing many stories about fuel businesses encountering substantial difficulty getting staff and so the increased investment in job matching services is positive, said Mark.
“That said, the difficulties in labour supply created by the closing of the borders remains a significant issue. We continue to engage with relevant Ministers on the need to reconsider visa restrictions (even if only on a temporary basis) given the difficulty that all businesses are having in recruiting staff – particularly in areas of regional Australia where the problem is being compounded by a lack of affordable housing for people seeking to relocate”, said Mark.
All in all, the Federal Budget handed down by Treasurer Frydenberg on Tuesday night is one that is ‘right for the times’. While it is a big spending budget in historical terms, the proposed spending is being directed at comprehensive measures that will likely stimulate economic growth and create the confidence needed for the economy growth and increased business investment.
“Treasurer Frydenberg has delivered a budget that stays true to the Morrison’s Government’s earlier commitment that Australia will ‘grow its way out’ of the downturn created by the pandemic. And that is a good thing”, concluded Mark.