Handing down the government’s Mid-Year Economic and Fiscal Outlook (MYEFO), Treasurer Josh Frydenberg revealed that the government’s much-lauded surplus would come in for the 2019–20 financial year at $5 billion, $2.1 billion less than the $7.1 billion surplus spruiked in April’s pre-election budget.
“Australia’s economy continues to show resilience in the face of weak momentum in the global economy as well as domestic challenges such as the devastating effects of drought and bushfires,” the mid-year budget update report stated.
“GDP growth in the first three quarters of 2019 was stronger than it was in the second half of 2018. However, while economic activity has continued to expand, growth has been slower than was expected at the 2019 Pre-election Economic and Fiscal Outlook (PEFO).”
According to the report, the government will be prioritising transport infrastructure projects, increased support for drought-hit communities and improvement of the aged care sector in line with the ongoing royal commission.
Sweeteners for business
The MYEFO revealed funding had been allocated or brought forward for a number of projects and measures, many of which will benefit small and medium businesses either through direct support or new work opportunities.
- the bringing forward of $4.2 billion over the forward estimates in transport infrastructure projects
- an ongoing commitment to “deregulation reform”, the next wave of which will focus on “making it easier to export more Australian food, streamlining major project approval processes... and creating a one-stop shop for business to update, manage and maintain their business registry data in one location”
- the establishment of an online checklist for businesses when taking on their first employee
- $623.9 million in funding over four years to address concerns raised by the aged care royal commission’s interim report, the majority of which is earmarked for 10,000 extra home care packages
The full set of MYEFO documents can be found on the federal government’s budget website.
Government urged to ‘drive the economy harder’
While the confirmation of a surplus to be delivered this year was widely seen as a positive for the country, business groups urged the government to step up a notch in order to arrest flagging economic growth.
“Now, our focus should be on driving the economy harder, and the private economy will need to do the heavy lifting. The forecast for new, job-creating business investment growth has been downgraded to just 1.5 per cent in 2019–20,” the Business Council’s Jennifer Westacott said.
“Our challenge is fundamentally about driving new investment with the right tax incentives, regulations, infrastructure projects and skills to make Australia globally competitive.
“The government has taken the first steps by reducing unnecessary and inefficient regulation which holds businesses back from investing for growth and creating more jobs. We need to continue that focus to unleash new investment opportunities, letting Australian businesses expand, invest and create new jobs.”
Ms Westacott pushed for tax reform to encourage business investment, not only for immediate stimulus but as an ongoing objective.
“The conversation Australia needs is not about short-term stimulus, this is not the problem we need to solve. Instead, we need a national debate about getting the right structures in place to drive business investment and sustained, faster economic growth,” she said.
Master Builders Australia, however, was blunt in pushing its views on the need for short-term stimulus, particularly as the building and construction industry limps along as a result of the property slump experienced since 2017.
“The immediate priority must be for the government to redouble its commitment to economic growth,” its CEO, Denita Wawn, said.
“Our industry depends on growth to be the biggest provider of full-time jobs in the economy. The federal government has enough fiscal space to boost demand in the economy while still achieving budgetary surplus.
“An expanded productivity agenda is also needed to build on the government’s continuing initiatives such as the deregulation taskforce to strengthen economic growth over time.”
Ms Wawn added: “The government still needs to look at ways of providing an immediate and effective boost to demand in the economy to get us over the soft patch we currently find ourselves in.
“Ramping up spending on construction of infrastructure is the best course of action. It offers a real opportunity to restore confidence among households and businesses and send everyone the message that our economy’s best days lie ahead of us.”
Measures ‘encouraging’, more ‘on the wish list’: Ombudsman
Meanwhile, Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), said there were “some welcome gifts for small businesses” in the government’s budget update.
“It’s encouraging to see the federal government has allocated funds to establish the national payment times reporting framework,” she said.
“The framework will require large businesses to publish information about their payment policies, including how much time it takes to pay their small business suppliers.”
The ombudsman also said it was welcome news that the government “will provide $156.2 million over four years to streamline regulatory compliance processes and cut the cost of doing business”, and a further $10 million commitment over two years to pursue the government’s “deregulation agenda to make it easier for small businesses to employ staff and invest in growth”.
“A new online checklist will provide small business employers with a guide to employing their first worker, along with a commitment to developing a new prototype ‘regtech’ platform,” she said.
“Funds have also been committed to extend the free tax clinic program, following a successful pilot program.
“While small businesses will still use the tailored and comprehensive advice of their accountant or bookkeeper, there are many Australian micro businesses that would benefit from additional support in understanding their tax and superannuation obligations.”
Ms Carnell said her office would continue to push for additional supportive measures to be included in next year’s budget, including “a lift in the $30,000 threshold for the instant asset write-off”.