Directors & Business Leaders Mixed on Budget

Business leaders including company and Not for Profit directors are divided on whether the Federal Budget best meets Australia’s future needs, despite unanimously welcoming tax cuts for small business.

Delivering the Budget in Canberra, Treasurer Joe Hockey used a 1.5 percentage point tax cut for incorporated businesses with annual turnover of less than $2 million and a 5 per cent tax discount for unincorporated businesses as a major selling point.

But Alex Malley, Chief Executive of CPA Australia, said the package was one of the only high points in Budget where it was evident the Government had been spooked by the negative reception it got in 2014.

“The only real highlights tonight are the positive announcements for Australian small business,” he said.

“Tonight’s budget lacks a real vision and commitment to the serious and overdue structural reforms that are desperately needed to secure Australia’s future.

“Still nursing the wounds of its first bruising budget process, where a number of key reforms were rejected by the community and the Parliament, this time around it appears the preference is to be a small target and to please as many people as possible.

“Australian business and the community are desperate for a boost in confidence and certainty – unfortunately there are only a handful of initiatives announced tonight that assures me that we’re heading in the right direction.”

“Minister Billson should be applauded for leading on the package of initiatives designed to support small businesses, and help them invest and create jobs.”

“Conversely, while the big ticket item of childcare reform is important, there are real questions over its funding.”

“There has to be a level of courage and conviction to tackle reform. It is what we expect from our political leaders, yet following the trauma of last year’s budget, this Government appears to have lost its nerve.”

“Deferring problems to future budgets with a nod and a ‘she’ll be right’ wink is unacceptable.”

Business Council of Australia Chief Executive Jennifer Westacott described the Budget as a “sound, sensible and thoughtful budget which takes pragmatic steps to get Australia’s fiscal strategy back on track while investing in jobs, participation and the capacity of the economy” – following her organisation’s urging for the Budget to ensure the durability of priority services.

“The Government has taken important decisions to preserve the integrity of major spending programs, rather than opting for ad hoc tax increases or other quick fixes that would impair economic growth and job creation,” she said.

“The budget is without doubt a shot in the arm to small business, and creates a better environment for business confidence that will drive investment, job creation and economic growth.

“The National Wage Subsidy Scheme – a similar scheme to what we called for jointly with ACOSS and the ACTU – recognises that we need to remove barriers and provide incentives to employers to take on people who are locked out of, or disadvantaged, in the job market. This is a welcome initiative.

“We also welcome the Government acknowledging through this budget the concerns about cutting income support for six months for people under 30. In order for it to be effective, it will be important the new arrangements of a four-week wait period for people on income support are combined with intensive support services and skills development.

“…the child care package is a sound approach towards encouraging people to participate in the workforce and, importantly, the government has targeted the greatest support to the most disadvantaged families."

Westacott said better targeting of the aged pension, the pharmaceutical benefits scheme and the paid parental leave scheme was essential if those programs were to stay durable over the long term.

She also said that while tightening the assets test for high net worth pensioners was sensible, further changes to pensions should be considered as part of a review of Australia’s retirement income.

“What’s important now is to continue to progress reforms that will grow the economy and create the jobs for people to participate in,” she said.

“Whichever Government is in power through the next decade will need to undertake major reforms to our education and skills, health, and retirement income systems.

“Reforms in these areas are dependent on making the fundamental architecture of the federation and the tax system fit for purpose for where Australia wants to be in 10, 20 and 30 years’ time.”

Like Jennifer Westacott, CEO of major professional services firm PwC Luke Sayers said the Budget was “pragmatic” and responded to the fiscal challenges Australia was facing.

“Whilst you could describe this budget as beige, it includes a number of important measures that will lift productivity and drive growth by encouraging workforce participation and supporting small businesses,” he said.

“This budget also aims to encourage more women to either re-enter the workforce or remain in the workforce through greater investment in childcare.

“Encouraging more women with young children back into the workforce not only improves participation, it also helps improve the gender diversity of our workforce, which in turn creates diversity of thought and outcomes.

“Whilst this Budget starts to move Australia in the right direction, more needs to ensure the trajectory is sustainable and prevent a ballooning debt problem for the next generation.”

“We encourage the Government to continue to lean into bold reform and secure Australia’s future for generations to come,” Sayers said.

“We must get our balance sheet in order and re-embrace fiscal responsibility as a nation. We can’t keep spending what we don’t have or we are going to leave future generations with a debt burden that will rob them of the standard of living we are used to today.”

Managing Director & Chief Executive Officer of the Australian Institute of Company Directors, John Brogden said the Budget had had to be an economic and political balancing act for the Abbott Government.

“It had to set out a credible path back to surplus based on cuts in spending and tightening in some areas of taxation, but not cutting so severely in the short term that it damaged the economy.”

“It also needed to be crafted so that it was more likely to get through the Senate than last year’s Budget, while still holding to a timetable to repair the budget bottom line and rein in debt.”

“It has gone at least some of the way to achieve that, although a budget surplus remains beyond the forward estimates,” he said.

The Business Council of Co-operatives and Mutuals (BCCM) welcomed proposals to strengthen and grow the small business sector in Australia, but questioned how the Government planned to empower small businesses to improve business efficiency and lower operating costs over the long term.

“Forming purchasing co-operatives is a tried and tested method for small and medium enterprises to group together for aggregate buying power,” CEO Melina Morrison said.  

“Including information about the co-operative legal structure on government funded information websites and programs is the obvious place to start. Funding co-operative case studies and working with the co-operative sector to educate and inform Australian small businesses about the benefits of co-operating, are other recommendations that we make to government,” she said.