The Federal Government has labelled this a “jobs” budget. As we all know, that’s code for enticing business owners to hire more staff to get the economy moving again.
Let me tell you, there are plenty of incentives to get us to do just that. This is a big spending Federal Budget to make sure business invests and takes on more staff.
The starting point is a booming economy
Business confidence is at an all-time high, as are job vacancy rates. And there’s no reason to think that will change as a result of this Budget. In fact, it could accentuate it.
Economic growth is predicted to be at 4.5 per cent next financial year before settling back down to a more normal 2.5 per cent the year after.
Remember this time last year and the scary predictions of unemployment above 10 per cent? It peaked at 6.9 per cent, is now 5.5 per cent, will continuing dropping to 5 per cent over the next year, then 4.75 per cent and bottom out at 4.5 per cent in 2023/24. That’s the lowest level it has been in decades.
But the average wage rise is expected to be just 1.5 per cent next year and 2.5 per cent the year after.
The next CPI figure will be high because it will bounce off the lows of this time last year at the depths of the COVID lockdown. But after that washes through next year’s inflation, it will be just 1.75 per cent.
In my view, the economy is so strong and the ongoing economic stimulus so big, that there is every possibility that wage growth and inflation will break higher than these forecasts which will put pressure on interest rates.
As a lot of businesses are experiencing at the moment, the border restrictions on migrant workers means a lot of those current vacant jobs are not being filled because Australians are not interested.
The tax incentives are still there
The instant asset write-off for new equipment purchases will be extended for another year as will be ability to offset past losses against future profits to include the 2022-23 year. Which is great news to offset the COVID loss years against, hopefully, next year’s big profits.
The reduction in the company tax for small and medium business from 30 per cent to 25 per cent has not been brought forward and will stay in place for now.
Interestingly, to make it simpler, faster and cheaper for small business to pause or modify Australian Taxation Office debt recovery actions, the Government is broadening the Administrative Appeal Tribunal’s (AAT) powers to pause or modify such actions until the underlying dispute is resolved.
This will provide an avenue for small businesses to ensure they are not required to start paying a disputed debt until the matter has been determined by the AAT.
Easing the staff shortage
As we already know, the Government will remove existing work hour limits for student visa holders who are employed in the tourism and hospitality sectors. Currently, international students are restricted to work 40 hours each fortnight during study periods.
It will also expand the COVID-19 pandemic event visa to include tourism and hospitality. The visa, is currently only open to workers in sensitive sectors such as agriculture and health care, and allows holders to work in the country for 12 months. And to encourage highly skilled people to relocate to Australia, the Government has introduced a new Global Talent visa and Temporary Activity visa.
As a way to get more people working in regional areas, the AgMove program will pay $2,000 in relocation assistance if people complete 40 hours of agricultural work over a fortnight.
If workers continue working on farms and complete 120 hours in four weeks, they will be eligible for reimbursement of up to $6,000 for Australian citizens, or up to $2,000 for temporary visa holders.
The Government will also make it easier for businesses to offer employee share schemes (ESS) by removing red tape and modernising the tax treatment of ESS by removing the cessation of employment taxing point for tax-deferred ESS.
There’s been a big focus on innovation
The Budget launched a new ‘patent box’ starting on 1 July next year. Under the patent box, income earned from new patents that have been developed in Australia will be taxed at a concessional 17 per cent rate … almost half the rate that applies to large companies.
The patent box will apply to the medical and biotech sectors and the Government will consult on expanding it to the clean energy sector.
The Government will also undertake a review into the tax treatment of venture capital. This review will examine whether current arrangements are creating incentives for additional investment and genuine early stage Australian startups.
A new national network of Artificial Intelligence Centres will be established to drive business adoption of new technologies.
There is also an expansion of the cyber security innovation fund to train the next generation of cybersecurity experts, as well as undertaking a digital skills cadetship trial which combines workplace and vocational training.
But the big splash on infrastructure is the centrepiece
In fact, the infrastructure investment is for 10 years and worth $110 billion.
Infrastructure commitments include:
- the North-South Corridor in South Australia
- the Great Western Highway and Newcastle airport in New South Wales
- the new Melbourne Intermodal Terminal in Victoria
- the Bruce Highway in Queensland
- METRONET in Western Australia
- highway upgrades in the Northern Territory
- Light Rail Stage 2A in the Australian Capital Territory, and
- Midland Highway upgrades in Tasmania
And … don’t get too stressed about Government debt as a result of this big spending Budget
I’m amazed at how much people stress about the level of Government debt. ‘Leaving a huge credit card bill for our children to pay off” is a very emotive sentiment but the figures show debt level, while higher than normal, is very manageable.
Compared with the rest of the world, we went into the pandemic with a low level of Government debt and we’ll come out of COVID with a low level. That’s because, as a strong stable economy, the Government has been able to borrow at very low interest rates – as low as 0.1 per cent.
The Budget papers show net Government debt rising from $617 billion this year to $920 billion in June 2024 … that’s a an almost 50 per cent increase.
But the total interest bill this year will be $14.1 billion and rise to $16.7 billion in the 2024 financial year … a rise of 18 per cent.
So the Government has borrowed 50 per cent more in debt but the interest bill has gone up only 18 per cent.