“The 2020-21 Federal Budget handed down by Treasurer Josh Frydenberg is a Budget that is right for the times: stimulatory, inclusive, confidence-building and forward-looking,” Innes Willox, Chief Executive of the national employer association Ai Group said today.
“If ever there was a time for fiscal stimulus it is now. The economic downturn ushered in by the COVID-19 pandemic is the deepest since the depression of the 1930s. The effective rate of unemployment is close to 10 percent, both household and business confidence are low, and the outlook is highly uncertain. Employment is not expected to grow at anywhere near the pace it has fallen, and GDP is expected to take some time to recover lost ground. Non-mining business investment is anticipated to fall by 14.5% in 2020-21 and only partially recovering in the following year. Inflation and wages growth are expected to remain low for a number of years.
“For 2020-21, the Budget anticipates a decline in GDP of 1.5% in a domestic economy that will remain interrupted by the pandemic, constrained by the global downturn and starved of the inbound migration that traditionally plays such an important role both for demand and supply.
“In the face of these forces, the large boost to household incomes from the bring forward of personal income tax cuts; the additional direct payments to households and the large commitments to infrastructure spending will stimulate aggregate demand and fuel the recovery. These measures come on top of the extension to JobKeeper and the further Coronavirus Supplement announced in recent months.
“Ai Group particularly welcomes the support the Government is providing to skills development and employment with its backing of 100,000 new apprenticeships and traineeships and the subsidy for employment of previously unemployed people aged under 35. These are measures targeted to younger Australians that we know from experience are among the most at risk in the wake of an economic downturn. The economic, social and human benefits of these measures are incalculable; they hold out a supporting hand to many young Australians.
“The new investment allowance that allows businesses with turnover below $5 billion to immediately expense the cost of capital equipment installed before July 2022 will provide a critical boost to investment, productivity and job creation. Without this measure the anticipated fall in non-mining business investment of 14.5% in 2020-21 would be much greater and the measure is a significant factor in the anticipated rise of 7.5% in non-mining business investment in the 2021-22 year.
“The tax loss carry-back measure available for businesses with turnovers of less than $5 billion will provide invaluable cash flow support for many businesses suffering from the current crisis. It will allow many to stay in business, keep employing people and invest for the future. The provisions will apply in relation to losses in the current and 2021-22 financial years.
“These measures give important recognition to the dynamic role of business in powering productivity growth and the development of the domestic economy. They will add very significantly to the measures announced last week to remove barriers to business expenditure on retraining and the tax relief and simplification measures for small businesses.
“The decision to rework the proposed changes to the Research and Development Tax Incentive is welcome. It will remove the retrospective nature of the proposed changes and appears likely to substantially address the range of business concerns with the changes.
“While Ai Group supports the policy objectives behind the changes to superannuation and sees particular merit in requiring strong performance from default superannuation funds, we urge the Government to consult carefully with the full cross-section of industry and other stakeholders before settling on the best approach to preventing multiple accounts. It is particularly critical that the measures of fund performance focus on net benefit to superannuation members rather than simply on fees.
“While this is a big-spending budget, it is spending up big on the areas required to turn around the economy and set it on the right path for the future. A stronger economy, with higher productivity, greater opportunities for employment and renewed business and consumer confidence are prerequisites for a return to widespread incomes growth in Australia. This, in turn, will re-establish the tax base on which our future fiscal strength can be regained,” Mr Willox said.