Budget revenues have fallen dramatically since the federal government’s first budget in May and it may be years until the budget is back in black, but Small Business Minister Bruce Billson says SMEs still have cause for optimism.
Treasurer Joe Hockey yesterday revealed a deterioration in the budget position of more than $10 billion in the Mid-Year Economic and Fiscal Outlook (MYEFO). The deficit for 2014-15 is now projected to hit $40.4 billion, more than $10 billion more than the $29.8 billion forecast in May.
The hit to the budget bottom line was much greater than had been leaked in media reports, with reports yesterday that government revenues had dropped by $7 billion since May.
Hockey said falling commodity prices, weak wages and employment growth and continued delays in passing budget measures through the parliament have contributed to $43.7 billion over four years being wiped from the government’s coffers.
The government said more than $10 billion of that figure is due to delays in passing budget savings through both houses of parliament, while $31.6 million is due to tax losses associated with falling commodity prices and lower wages.
Without changes in policy, the government said budget deficits would be projected to at least 2023-24.
But speaking to SmartCompany this morning, Small Business Minister Bruce Billson says he is “positive and optimistic about the road ahead” and the government’s “economic strategy is on track”.
“MYEFO certainly reinforced we are on track with our budget and economic strategies,” Billson says.
Billson says the government is continuing to implement the budget measures it announced in May, although he admitted it is faced with “some headwinds in the Senate”.
“But we have no option to sit back and sleepwalk into further debt,” Billson says.
Billson pointed to infrastructure spending, recently signed trade agreements, stable interest rates and the Australian dollar “being a bit more helpful” as encouraging signs in the economy and said the number of new business registrations is up by 10% this year.
“Clearly a well-functioning economy is in the best interests of all small businesses and the signs of improvement are encouraging in that respect,” he says.
More specifically, Billson says there are additional funds in MYEFO to strengthen anti-dumping measures, funding to extend apprenticeship training centres and simplification of the rules around the fuel excise, all of which will benefit small businesses.
He says SMEs in the construction industry will also benefit from now being able to access the new construction code online free of cost, which will mean 350,000 small businesses will not have to spend $400 each year to access the guidelines.
Billson says the government’s ongoing agenda to cut red tape was also an important part of MYEFO, which forecasts higher expected savings from reduced compliance costs, up from $1 billion annually to $2.1 billion.
And while Billson says SMEs will also benefit from the government’s recently signed free trade deals, he cautions liberalising trade comes at a cost.
“Opening up new market potential of hundreds of millions for our small businesses comes at a cost to government revenue as well,” he says.
“But for every cost, we have offset it by savings. We are bringing that financial discipline. We will continue to seek to implement our budget strategy, recognising former Treasurer Wayne Swan expected $100 billion more in revenue than has actually been received but then locked in expenditure anyway.”
Elsewhere, members of the small business community were not surprised by the state of the nation’s book revealed in MYEFO. Alex Malley, chief executive of CPA Australia, told SmartCompany the “bigger concern is a continuation of the trend of chasing a surplus for surplus’ sake”.
“Cost-cutting alone is not the way to build a broad-based, sustainable and resilient economy,” Malley says.
“We have known for years that we’ve become too reliant on iron ore and coal exports and that iron prices have been declining since 2011 … the real questions are about the reforms necessary to drive revenue growth, particularly in the non-mining sector”.
Peter Strong, chief executive of the Council of Small Business of Australia, agrees, telling SmartCompany the way to increase government receipts is “to focus on growth”.
“You don’t fix it by cutting, cutting, cutting,” Strong says.
“We want the government to focus on articulating the growth strategy, particularly for the small business community, particularly for small business people that want to grow.”