Treasurer Josh Frydenberg has signalled the Morrison government will not skimp on state spending or increase taxes in the upcoming federal budget, given the nation’s unemployment rate remains above 5%.
In a speech delivered today, Frydenberg confirmed the government is not about to enter the next stage of economic recovery by curtailing government spending, despite the fact that COVID-19-related debts will leave the budget in deficit until 2028 at the earliest.
Frydenberg said the government plans to avoid moving to the second phase of its fiscal strategy until it is “confident” it has “secured the economic recovery”.
“We first want to drive the unemployment rate down to where it was prior to the pandemic and then even lower. And we want to see that sustained,” he said.
For inflation and wages to grow, Frydenberg said the target unemployment rate now needed is between 4.5% and 5%.
In March, the unemployment rate decreased to 5.6%. However, that figure does not include any changes to unemployment since JobKeeper ended.
While the government has dodged announcing specific budget measures so far, it has hinted that the budget will be women-focused, after it faced backlash last year for not doing more to address women’s economic security.
But for small businesses — who have been trading through changing lockdown restrictions and an ongoing international border closure — there is much to be anticipated.
Access to workers, insurance and support for tourism
Peter Strong, chief executive of the Council of Small Business Organisations Australia, says he wants to see the government address the issues of a lack of workers, insurance, mental health and support for specific industries, such as hospitality, tourism and entertainment.
“What we need now is some support on the ground for businesses to address this lack of access to workers, and a better connection between the business community and the training sector,” Strong tells SmartCompany.
And, with JobKeeper ending, Strong says there is a continuing crisis for businesses that have relied on international tourism.
“Targeting those particular sectors and getting assistance there is important,” he says.
COSBOA has been “pleased” with the government’s previous budgets, but would like to see the instant asset write-off continue.
Digital transformation, cyber security and tackling unemployment
Jane Rennie, general manager external affairs at CPA Australia, wants to see more investment in digital transformation, cyber security and tackling long term unemployment.
“Supporting SMEs with digital transformation is at the top of our list of ways the government can help business with this budget,” Rennie tells SmartCompany.
She also wants to see a “sizeable investment” into regtech to help businesses communicate with the government, and a boost to the federal governments $6.9 million program to help SMEs upgrade their cyber security.
To tackle long-term unemployment, Rennie says a JobMaker-type program would be beneficial.
“However, to increase uptake and reduce red tape, businesses should be paid directly by Services Australia and there should be no requirement for a net increase in headcount,” she says
Tax reform for startups
Global financial firm network PwC is calling on the government to back technology, innovation and homegrown entrepreneurship with tax reform.
Jonathan Malone, PwC tax partner, said while the pandemic has shown that tech and digital innovation are key to a growing economy, Australia’s “tax settings are holding us back from going to the next level”.
PwC has proposed an innovation box regime, which would apply a lower company tax rate to profits generated from patents or other intellectual property that have been developed locally.
Malone also said tax rules for employee share schemes should be simplified to attract more startups and help them grow.