Australia is powering towards the world’s longest period of economic growth without recession, but while economists see plenty to like ahead of May’s federal budget, not all states are equal, and the small business community is pushing for tangible policies to help companies expand over the next few years no matter where they are based.
A quarterly business outlook report from Deloitte Access Economics released today highlights a “spectacular lift in wealth” across the nation, due largely to our ever-climbing house prices, with the “average” Australian family now millionaires, given the net worth of households is now $9.4 trillion.
However, as economists have previously pointed out when considering the vulnerabilities of Australian business conditions, some states have it better than others.
The Deloitte report suggests Western Australia, the Northern Territory and Queensland are continuing to suffer from the mining slowdown, while New South Wales and Victoria have been the big winners out of economic “megatrends”, with population growth in Victoria giving the state a leg up into the future.
“Housing construction is continuing to show plenty of strength in NSW, with construction activity up by almost 20% over the past year alone. A combination of factors have been helping on that front, including the Reserve Bank’s further cuts to interest rates last year, and the fire in the belly from foreign investor interest in Sydney property,” the report explains.
Meanwhile, other states face challenges given “good” economic news is not necessarily as closely tied to job creation. For example, a rise in gas prices may have delivered a dividend in Queensland, but for businesses looking to offer jobs to workers in this climate, there’s actually fewer opportunities available once projects start operation.
“We’ve often referred to the lack of a ‘feelgood factor’ in Queensland’s economy, and that divergence between economic growth and job growth highlights exactly what we’re talking about,” the Deloitte economists said.
Other Australian states are doing the best with what has been handed to them, say Deloitte economists.
Tasmania’s economy is “chugging away”, and while the state is forecast to have modest growth over the longer term, retailers are doing well while the weak Aussie dollar is helping to boost tourism.
The Australian Capital Territory’s fast economic growth has been attributed to government decisions on spending and the Reserve Bank’s approach to interest rates, while South Australia is managing tough conditions, including for retailers, better “than is widely recognised”, the report says.
Observations about the divide in business conditions between states echo those of insolvency experts over the past year, who say areas experiencing economic weakness often lead businesses into financial troubles beyond their control.
In the 2016 financial year, 2,045 Queensland businesses entered external administration, according to the Australian Securities and Investments Commission, with Chris Cook, a partner at insolvency accounting firm Worrells’ Brisbane office, reporting the mining downturn was continuing to put a strain on how many businesses can stay afloat in the state.
“Where we’re really seeing the flow on effect from the mining industry scaling back,” he said in December.
SMEs looking for tangible benefits
In the lead up to the budget, small business groups are focused on the tangible economic benefits of policies that will allow companies to grow, no matter where they are operating.
In its 2017-18 federal budget submission, the Council of Small Business of Australia (COSBOA) calls on the government to support SMEs — which provide 44.8% of national employment —with five key priorities that will provide tangible benefits to business operators.
These include measures that have already been secured by the government, such as dropping the corporate tax rate to 27.5% for businesses turning over up to $10 million, as well as a recommendation to extend the $20,000 instant asset tax write off scheme. While Small Business Minister Michael McCormack has previously said he will lobby to retain the policy, which will now be available to all businesses with a turnover of up to $10 million, the future of the scheme is unclear after July 1, 2017.
However, COSBOA also wants to see greater scope for small businesses and startups to be able to invest in new projects, particularly for younger Australians that have a more challenging time securing equity.
The council is calling on government to guarantee startup investment loans for young people, given “only those from wealthy families have access to these opportunities creating a small business ‘opportunity gap’”.
Other priorities include establishing a small business allowance and more opportunities for low-cost seed capital opportunities for startup founders.
While broader stability and economic management are a priority for SMEs, there also need to be specific policies and tools on the table to help smaller operators take risks and start projects.
“While small businesses may not generate the same amount of revenue as mining companies they remain crucial to national economic growth. Small businesses contribute to both national and state tax revenue and underpin a range of services provided by governments,” the COSBOA submission says.