Mid-year budget has small business groups concerned, despite painting a bright outlook

MYEFO mid-year budget

Treasurer Josh Frydenberg. Source: AAP/Lukas Coch.

The federal government has delivered its mid-year budget update, showing a relatively small improvement of $7.4 billion of the budget’s bottom line.

The Mid-Year Economic and Fiscal Outlook (MYEFO), released on Thursday, forecasts the underlying cash balance for this financial year to be a deficit of $99.2 billion, down from $106.6 billion forecast in the May budget.

By 2024-25, the government expects a deficit of $57.5 billion or 2.3% of GDP.

Treasurer Josh Frydenberg said the improvement of the budget’s bottom line was despite the Delta lockdowns in New South Wales and Victoria this year.

The federal government, however, responded to the 2021 outbreaks with tighter spending compared to the first year of COVID-19.

The federal government contributed $7.3 billion to state business support packages as state governments enforced lengthy lockdowns to curb the spread of the Delta coronavirus strain.

Alexi Boyd, chief executive of the Council of Small Business Organisations Australia (COSBOA), says when business support changed from being federally delivered to being managed by the states, it reduced the amount of relief available and made it more difficult for businesses to access.

“What we experienced as a national body is the fact there was a lot of disparity between the states,” Boyd tells SmartCompany.

“When federal support was removed and turned into a state-based approach, it also didn’t use the existing mechanisms that businesses were comfortable with, so a lot of businesses didn’t take up that support,” she adds.

The mid-year economic update states that the Australian economy is poised for strong growth, thanks to the country’s high vaccination rate.

Importantly, the update assumes that 90% of Australians aged 16 and above will be fully vaccinated by the end of this year, and lockdowns will no longer be required to manage COVID-19.

Boyd says the vaccine rollout has been “really positive” and has helped keep businesses open.

“We need to get those vaccinations up and keep the booster shots going into arms because we know that will support an open economy,” Boyd says.

The unemployment rate is expected to fall to 4.5% by the end of June next year before falling again to 4.25% in 2023.

The reopening of international borders will lead to an increase in overseas migration and population growth, which the government expects will drive consumption growth.

Net overseas migration is forecast to increase to 180,000 in 2022-23, before rising further to 235,000 in 2024-25.

Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, said as the economy improves the key concerns of businesses are skills and labour shortages.

“The announcement that jobs growth is set to surge by one million over the next four years, means businesses will need access to skilled workers,” McKellar said.

“In 2022 we need to continue to open up our international borders in a safe and controlled manner to accelerate the economic recovery,” he added.

Boyd agrees worker shortages are the number one issue small businesses are experiencing, irrespective of the industry they operate in.

“For example, one in six petrol stations are not operating at normal hours because of a shortage of staff and the hospitality industry is facing a shortage of 100,000 workers,” she says.

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