Federal Budget: cause for optimism with delivery challenges
"The Federal Budget will give business and the community confidence for the future and is cause for optimism. The very significant tax contribution from business has created room to move on tax relief, infrastructure and deficit reduction," Innes Willox said.
"The Government has moved to take advantage of the economic improvement now underway by proposing tax relief to business and households, as well as a significant boost to infrastructure spending. This strategy is anticipated to drive further growth in activity, real incomes and job creation. The national challenge, with skills shortages in key areas already becoming apparent, is to ensure we have the skills to deliver this growth and to train the workforce of the future."
The Budget makes clear strides in four of the five major priority areas identified by industry:
- The Government is staying the course on the plan to phase in reductions in the company tax rate over the coming decade.
- This is linked to broader tax reform by phased reductions in personal income tax with a clear initial emphasis on lower and middle-income earners.
- The Budget makes further investments in a range of far-sighted infrastructure initiatives to improve regional connectivity, urban congestion and national productivity.
- The acceleration of the pace of improvement in the budget bottom line is welcome and will see a return to surpluses (from 2019-20) in line with the gradual strengthening of the domestic economy.
There are also important initiatives in the skills area which was the fifth area of priority identified by business. These include the increased funding for the Skilled Australians Fund and measures focused on skilling mature-aged and older Australians and facilitating their involvement in entrepreneurial activities. But it is clear that additional future investments in education and training will be required to ensure the budget measures deliver to their full potential.
The Budget anticipates a solid pick-up in GDP growth with the benefits of this flowing through to higher wages and further improvements in business investment in the next few years. Inevitably there are risks in these forecasts which in large part will be mitigated if corporate tax reform proceeds and if there are further investments in skills and training.
Willox said: "The new infrastructure projects sensibly focus on relieving and improving our national transport systems. However, when added to the huge defence infrastructure spend and new growth in the mining sector, more needs to be done on delivering the skills our economy desperately needs. There is clearly room for more investment in skills than is planned. Before the Budget we already needed to add 915,000 workers to our economy by 2022. This includes an extra 120,000 in the construction sector alone. These numbers will now jump further.
"Business will welcome the extension of the capped instant asset tax write-off facility for smaller businesses and the decision to maintain the permanent immigration target at 190,000.
"The Government has clearly listened to concerns voiced by industry about previous proposals to change the Research and Development Tax Incentive. While the rejection of some of the more restrictive proposals is welcome, the new changes, while aimed at attracting new investment in R&D intensive industries, will add new layers of complexity, especially for smaller businesses. Further close consultation with industry in refining the measures will be required to reduce compliance costs and avoid unintended consequences," Willox said.
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