In the midst of the COVIC-19 pandemic, the 2020/21 Federal Budget was heralded as the most anticipated in 100 years, a generation - at least a very long time. The date was pushed back from May to October so the Treasurer could take into account more of the economic impacts of the pandemic and expected recession in the budget measures. It certainly was significant with extensive spending, business investment support and continuation of some of the measures introduced in the Government’s stimulus policies.
While the spending and initiatives were welcomed by businesses and individuals, it racked up a record deficit for the country. As it is widely acknowledged that conservative (Liberal-National) governments do not embrace deficits, 2021/22 is now greatly anticipated. Will the Government revert to kind with the echoes of Treasurer Josh Frydenberg’s famous ‘back in black’ comments in bringing down an earlier budget? No. The Government is embracing the deficit situation and taking a ‘repair the economy first’ approach.
The 2021/22 Federal Budget speech will be delivered in the Parliament by Mr Frydenberg on Tuesday 11 May and the pre-budget announcements and indications have now started to filter out. The Treasurer made his major speech prior to the budget on Thursday 29 April to a business chamber in Canberra. View the pre-budget submissions and announcements here.
So what is in store for your business? Our team was immediately across the speech and provide you with this snapshot of the Treasurer’s announcements and what we and the economy know so far as to what 11 May might have for your business.
Treasurer Pre-Budget Speech
Overall, the Treasurer’s pre-budget speech was more an overview of the Government’s recalibrated fiscal strategy and general approach to the next phases of the economic recovery rather than including detailed policy.
He clearly stated it would not be an austerity budget in an immediate attempt to reduce the budget deficit. It would take a spending approach with a focus on driving jobs and growth. The speech opened with a recap of the global and domestic impacts of COVID-19 and the temporary and targeted measures taken by the Government in response. He said there would be the same principles that would guide the Government’s actions in this next phase. Transitioning from emergency support towards recovery led by jobs growth.
He acknowledged that the economy would be smaller persistently than what was forecast in the 2019/20 budget, due to the pandemic. Up to 6% smaller by the end of 20/21. Due to the decrease in net migration, the population growth would also be slower. This places pressures on the labour market especially in some sectors that rely on overseas workers. He noted that while migration will return, (presumably when international borders reopen) the numbers lost during this period can’t be replaced.
Mr Frydenberg noted that inflation, prices and wages growth are expected to remain lower for some time. These lower numbers are significant as they result in lower-income to the Government by way of income taxes received. Due to stimulus measures such as loss carryback and investment tax deductions, corporate tax receipts would also remain lower.
He clearly stated that the budget would be a recalibration of fiscal approach, different from the previous approach of pursuing budget surplus and suited to the current economic situation. The initial focus of the budget will be on consumer and business confidence. Boosting these via primarily promoting jobs. A key priority is driving unemployment down even lower.
Previously the Government had indicated a target unemployment figure of below 5%. The latest figures place it at 5.6%. But it is considered that they are now looking to achieve a figure in the 4% range.
For business owners, the key takeout from the Treasurer’s speech was the intention to continue with the provision of target, temporary and proportionate support. This through tax measures in order to leverage jobs and investment in the private sector.
The major focus of the budget will be on jobs and structural reforms.
Special mention was made of:
- Investment in reliable and affordable energy and new technologies.
- Continuing with the $10b in transport infrastructure already brought forward.
- Investment in training and skills so businesses have access to the skills they require.
The Treasurer reflected on the changes to the global economy, specifically supply chains and trade patterns, which are significant to Australian businesses. He concluded by stating that budget repair would not be undertaken through austerity or by higher taxes.
Specific inclusions in the budget will likely start to be announced in the week leading up to the budget speech on 11 May. But we remind businesses that key investment measures as announced in the October budget are still available and benefits can be realised with equipment purchases.
Specifically, these are the accelerated asset depreciation measures of temporary full expensing and Instant Asset Write-off. In the October budget, these were amended and extended, within the criteria, through 2021/22.
Contact us on 1300 000 003 to discuss how we can assist you with your acquisition plans.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.