FEDERAL BUDGET LAYS GROUNDWORK FOR BUSINESS-LED ECONOMIC RECOVERY
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Copyright © 2021 Chamber of Commerce and Industry of Western Australia
Australia’s economic recovery from COVID-19 has been stronger and faster than expected - buoyed by a tidal wave of policy support from governments and the RBA, surging commodity prices and success at containing the virus.
Ultimately, a better performing economy means an improved fiscal outlook. The national economy is expected to grow by 1.25 per cent in 2020-21 - up from 0.75 per cent in the December 2020 update (MYEFO) – before accelerating to 4.25 per cent in 2021-22.
Looking to the labour market, the unemployment rate is expected to hit 5.5 per cent at the end of this financial year – well below the 7.25 per cent forecast in December 2020. The impact is reflected in the level of JobSeeker payments, which will be $4.1 billion lower this year than anticipated in December. And with more Australians finding work, the Government expects to collect an additional $9 billion in household income taxes over the coming financial year.
Surging iron ore prices, thanks to robust demand from China and constrained supply from Brazil, have driven a $5.4 billion uplift in expected company tax receipts in 2020-21.
Taken together, these factors have driven a remarkable improvement in the Government’s fiscal outlook – with the total economic uplift more than offsetting the significant rise in new spending initiatives. The underlying cash deficit is expected to be $161 billion this year, $36.7 billion lower than anticipated in December.
Net debt, meanwhile, is expected to peak at $980.6 billion in 2024-25. Working in Australia’s favour is the fact that our net debt to GDP ratio is much smaller than other countries, and the fact that the cost of servicing debt is currently very low thanks to low interest rates.
FEDERAL BUDGET ANALYSIS 2021
The 2021-22 Federal Budget confirms Australia’s remarkable economic and fiscal turnaround, with the Government laying the policy groundwork for continued economic recovery. It aims to drive Australia’s unemployment rate below 5 per cent and enable the private sector to re-take the reins to spur the next phase of growth.
Assuming that closed borders will restrict skilled migration until mid-2022, there is a headline focus on addressing COVID-related workforce challenges through Budget measures to bolster participation and productivity.
The Government has committed $1.7 billion to improve childcare affordability for families with multiple children aged under six, better supporting women returning to the workforce.
ABN: 96 929 977 985 ARBN: 099 891 611
Copyright © 2020 Chamber of Commerce and Industry of Western Australia
Investment in low emissions technologies and job-boosting green energy initiatives lead the Government’s climate change response.
The Government will invest $1.6 billion over ten years (including $761.9 million over four years from 2021-22) to incentivise private investment in low emissions technologies and industries.
This includes $1.2 billion over ten years ($634.4 million over four years from 2021-22) to create a Technology Co-Investment Facility supporting regional hydrogen hubs, carbon capture use and storage technologies, and project-based international partnerships on low emissions projects.
In addition, the government has committed $316.7 million to help industry and businesses voluntarily reduce their emissions and adopt low emissions technology.
$1.6 BILLION OVER TEN YEARS TO FUND PRIORITY CLEAN ENERGY TECHNOLOGIES INCLUDING CLEAN HYDROGEN AND CARBON CAPTURE PROJECTS
The Government has put the private sector in the driver’s seat of Australia’s economic recovery.
The Budget includes $16 billion in scheduled tax cuts for small and medium-sized businesses (SMEs) by 2023-24, which includes reducing the tax rate for SMEs from 30per cent to 25 per cent from July 1, 2021.
The Government is also extending temporary full expensing and temporary loss carry-back for an additional year, providing $20.7 billion in tax relief to businesses over the forward estimates period.
The Budget is earmarking $1.2 billion to assist the recovery of industries most affected by the COVID-19 pandemic.
The tourism sector will benefit from 800,000 half-price airfares to regional centres and $270 million to extend programs supporting tourism businesses that rely on international tourism.
International education providers will be able to access grants of up to $150,000 to invest in new infrastructure and new teaching solutions, with $26 million in support to help non-university higher education attract more domestic students.
A further $300 million is being injected into the arts, including $125 million to support new events and productions.
Other initiatives to support businesses include further funding for manufacturers to expand into strategic sectors, extending the Junior Minerals Exploration Incentive, tax relief for craft breweries and smaller distillers, reduced taxes on income from innovative research (patent boxes) and tax offsets for digital gaming businesses.
The Government has committed $135 million to reducing red tape, saving businesses an estimated $430 million a year in compliance costs as a result of various measures, including:
$16 BILLION IN TAX CUTS FOR SMES
$1.2 BILLION FOR INDUSTRIES IMPACTED BY COVID-19
$135 MILLION PACKAGE TO REDUCE RED TAPE
The Government’s pipeline of infrastructure works will provide an ongoing boost to the WA economy while creating certainty for industry over the next four years.
The Government’s $1.3 billion investment in WA infrastructure projects will provide an economic boost to businesses, commuters, and the WA economy.
The infrastructure spend includes $379 million in new funding for METRONET covering the Hamilton Street/Wharf Street grade separations, elevation of associated stations, and additional funding for the High Capacity Signalling project.
Key roadworks, including $200 million for Great Eastern Highway upgrades, $112.5 million for Reid Highway grade-separated intersections and $85 million for the Perth Airport Precinct (northern access), will help improve business productivity and support economic growth.
The Budget also includes initiatives targeted at regional WA, including $160 million for agricultural supply chain improvements to better connect farmers to domestic and international markets.
$1.3 BILLION INVESTMENT IN WA INFRASTRUCTURE
$52.8 MILLION FOR INDIVIDUAL BUSINESSES IN PRIORITY SECTORS
$107.2 MILLION FOR PROJECTS ADDRESSING SUPPLY CHAIN VULNERABILTY
The Government’s investments in training and early childhood education will help Australia tap into the full potential of its workforce.
The Budget earmarks an increase in the Child Care Subsidy for families with more than one child aged under six in care, while also removing the annual subsidy cap of $10,560 per child for families with a combined income of more than $189,390.
The changes, which will apply from July 2022 subject to legislation passing Parliament, would tackle some of the worst workforce disincentives for women.
In addition, the Government is investing $2 billion in a reformed kindergarten funding agreement aimed at providing certainty and long-term stability for the early childhood education sector and universal access for children to kindergarten. CCIWA has found that the way kindergarten is funded and operated in WA creates barriers for working mums to take on more hours and welcomes reform in this area.
The successful Boosting Apprenticeship Commencements wage subsidy will be extended until March 31, 2022, a particularly welcome decision for WA. The program supports apprentices and trainees by providing employers with a 50 per cent wage subsidy (up to $7000 a quarter) if they hire an eligible young person.
The Government is also extending the JobTrainer program until December 31, 2022, which will provide an additional 163,000 free or low-cost training places in areas of skills shortages (such as aged care), as well as in digital skills.
The Government has set aside $4.6 billion for a range of measures to get unemployed Australians into work, including increased wage subsidies, increased support for foundational skills training, expansion of the Local Jobs Program and further funding for youth employment services and National Careers Institute-supported careers advice.
$1.7 BILLION TO IMPROVE CHILDCARE AFFORDABILITY
$500 MILLION FOR JOB TRAINER FUND
A stronger than expected economic recovery and surging commodity prices underpin a stunning improvement in the Government’s economic and fiscal outlook.
The Budget provides much-needed investment to enable health and community services providers to deliver quality services to Australia’s most vulnerable.
The Budget sets aside $17.7 billion over five years to address the recommendations of the Aged Care Royal Commission. Key commitments and programs include:
The Government will also provide an additional $13.2 billion over four years to the NDIS to allow more people to benefit from the scheme. Further, people with a disability who are eligible for Disability Employment Services and are job-ready will be able to choose to participate in digital services from January 1, 2022.
The Budget also commits $2.3 billion to mental health services, with more than half allocated to treatment centres to fund a network of specialist Head to Health Adult Mental Health Centres.
For young Australians aged 12 to 25, $278.6 million is being made available to enhance and expand headspace centres.
$17.7 BILLION TO RESPOND TO AGED CARE ROYAL COMMISSION
$13.2 BILLION OVER FOUR YEARS FOR NDIS
$2.3 BILLION FOR MENTAL HEALTH SERVICES
$2 BILLION RESEARCH AND DEVELOPMENT TAX INCENTIVE
$2 BILLION IN KINDERGARTEN FUNDING
ENABLING BUSINESS TO DIGITALISE AND REDUCING RED-TAPE
Support package for industries most affected by COVID-19.
The COVID-19 crisis has confirmed how vital it is to have a strong economy that can continue to guarantee the delivery of essential services.
To support senior Australians who wish to stay at home for longer the Government is providing $1.6 billion for an additional 23,000 home care packages. This means the number of home care packages will have increased threefold from around 60,300 in 2013 to around 185,500 in 2021.
Alongside this, a further $11.3 million will be provided for additional training and support for aged care providers and carers of people living with dementia.
The Government has said its response to the Aged Care Royal Commissions’s final report in February next year will involve significant additional investment.
The Government is providing a further $3.9 billion for the NDIS. This extra funding ensures Australians eligible for the NDIS have access to the supports they need now and into the future. The Government says this funding is guaranteed to be spent on disability services.
An unprecedented $5.7 billion will be spent on mental health over the 2020-21 financial year – providing vital support for small business owners and sole traders to take care of their own and their staffs’ mental health.
The Government has also provided an additional $1 billion through the National Housing Finance and Investment Corporation to support the construction of affordable housing.
WA’s health and community services providers will welcome this additional funding.
$1.6 BILLION FOR 23,000 EXTRA HOME CARE PACKAGES
ADDITIONAL $3.9 BILLION FOR THE NATIONAL DISABILITY INSURANCE SCHEME
Notably, the successful Boosting Apprenticeship Commencements program, a 50 per cent wage subsidy to help employers take on apprentices and trainees, has been extended until March 31, 2022. The funding committed to the JobTrainer program has also been doubled, extending the offer of free or cheaper training courses to eligible young people.
These Budget measures are welcome wins for the WA economy, though they will not fully address our State’s serious skills shortages. It remains vital that all levels of government cooperate to help businesses get the skills they need, which will require access to overseas talent.
Significant policy reform should still be pursued at the Federal level, including tax reform, further measures to enable women to re-enter the workforce after having children, and improvements to Australia’s system of industrial relations.
CCIWA will continue to work with the Federal Government on these and other issues, to make WA an even better place to live and do business.
$565 MILLION TO FUND INTERNATIONAL LOW EMISSIONS TECHNOLOGY PARTNERSHIPS
$210 MILLION FOR NEW AUSTRALIAN CLIMATE SERVICE INITIATIVE
$2.7 BILLION TO BOOSTING APPRENTICESHIP COMMENCEMENTS WAGE SUBSIDY
$4.6 BILLION TO HELP UNEMPLOYED GET WORK