It’s federal budget season, and the nation’s small businesses are pondering whether there’s any good news on the horizon for what’s shaping up to be another challenging year.
The federal budget sets out the estimated expenditures and revenues for the Treasury over the coming financial year, highlighting the fiscal policy for the federal government.
This year, the government has announced that the budget will be handed down earlier than usual, on Tuesday, March 29. The budget is normally delivered in early May but will take place earlier than usual due to the timing of the federal election, which will likely occur in May.
Looking back at the 2021-22 federal budget
The 2021 budget focused on vaccine roll-out costs spending, tax cuts for low-and-middle income earners, the scrapping of the $450 super threshold as well as investment in skills, business reliance and female leaders.
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A range of mental health support measures were also announced.
It was a lot to unpack for small businesses, who were hopeful that the worst of the pandemic was behind all of us.
Unfortunately, last year’s budget was announced well before the Omicron variant hit our shores, putting an additional handbrake on recovery efforts.
From then to now: What’s happened since last year’s budget?
The Morrison government’s Mid-Year Economic and Fiscal Outlook (MYEFO) delivered in December projected a stronger than expected economic outlook, with low unemployment rates and expected growth in GDP.
But with Omicron impacting most of the nation and causing pressure on the healthcare sector, supply chain issues, a tight labour market and low consumer confidence — the situation has changed remarkably.
Now, many business operators and workers alike are hoping this year’s federal budget will provide a lifeline to small businesses that have struggled to keep their head above water during the pandemic, despite Treasurer Josh Frydenberg recently signalling an end to COVID-era government spending in an industry address.
Pre-budget submissions from individuals, businesses and community groups for this year’s budget closed late January, and are now being digested ahead of the budget being handed down.
Economy by numbers: Pandemic fallout continues into 2022
Not everyone seems as optimistic about the state of the Australian economy as the government, and the Deloitte Access Economics’ quarterly Investment Monitor reveals there are a number of concerns for the 2022 outlook.
“The pandemic is far from over and the resultant uncertainty will continue to weigh on business decision-makers as they decide the ‘when’ and the ‘what’ of any future expansion plans,” the report’s lead author, Stephen Smith says.
The researcher also highlighted a number of key risks, including the way the pandemic has interrupted some behaviours, such as where and how we work.
“Capital city mobility didn’t return to pre-COVID levels in either 2020 or 2021, and the Omicron outbreak points to this trend continuing in early 2022.
“That will have implications for transport networks, with likely changes in weekday peak demand and a greater preference for private transport.
“Potentially more important still, the longer that the COVID disruptions continue, the greater the chance that some changes — such as people working from home — will prove permanent, with implications for office demand in particular,” says Smith.
Despite that long list of concerns, Deloitte Access Economics expects business investment to grow in 2022 before accelerating in 2023 and 2024 — adding almost two percentage points to Gross Domestic Product (GDP) over this period.
Public investment is forecast to grow in 2022 before falling in 2023 as the amount of infrastructure investment work in the pipeline reaches a peak.
IBISWorld downgrades March quarter growth expectations
The economy is expected to struggle due to the Omicron wave, according to the IBISWorld Special Report: Supply Chain and Labour Challenges.
Prior to the Omicron outbreak, many sectors were already facing significant labour shortages.
The Bureau of Statistics shows that job vacancies grew by 18.5% in the three months through November 2021, with over one fifth of businesses reporting job vacancies.
Comparatively, the number of businesses reporting job vacancies prior to the pandemic in February 2020 was 11%, representing a 74.2% increase since the pandemic began, the report reveals.
In addition, declines in consumer sentiment and business confidence are anticipated to cause demand growth to weaken across most sectors of the economy.
Due to demand constraints and supply challenges brought on by the Omicron wave, IBISWorld forecasts March quarter GDP to grow by 0.6%, down from the pre-Omicron forecast of 1.6% growth.
Business owners and advocacy groups: Targeted support needed
Small and medium business owners have been clear about the sorts of support they’re hoping to see from the government, with a recent survey from MYOB revealing that any simplifying or reducing of business taxes, and the creation of more assistance packages for businesses impacted by COVID, will gain favour among operators.
The survey of over 1,000 small and medium business owners and decision makers posed a range of policy-based questions and showed 63% of respondents would vote for policies that significantly simplify the reporting of GST or BAS.
Of those surveyed, 63% are also in favour of reducing the company tax rate from 27.5 to 25%, and 61% would vote for assistance packages for COVID-impacted businesses.
Accounting organisation CPA Australia says this kind of targeted support measure holds the key to helping businesses manage future disruptions.
The organisation has made a submission to the federal government requesting short-term business support and longer-term economic transformation.
“It’s increasingly likely that many businesses will experience ongoing disruptions for the whole of 2022, and potentially beyond,” CPA Australian senior manager business policy, Gavan Ord says.
The economy faces its own version of ‘long COVID’ if support isn’t forthcoming to help businesses manage future outbreaks, says Ord.
“Rolling outbreaks, leading to worker shortages, supply chain issues and reduced consumer spending, may mean that trading conditions wax and wane all year.”
CPA’s top budget recommendations for small and medium business support:
- Support for digital transformation
- Increasing the size of the skilled labour pool
- Back off on new regulatory requirements to give businesses breathing room to focus on current challenges
- Access to business advice
- Fiscal strategy to prioritise economic transformation, as opposed to debt repayment
Budget response: One to watch in 2022
Traditionally, the federal opposition leader is entitled to a budget reply speech, which unpacks what is included in the budget and points out any perceived shortcomings.
The speech to be delivered by opposition leader Anthony Albanese this year will be particularly crucial given the federal election due to follow soon after.
But whatever this year’s budget season brings, both the sitting government and the opposition are guaranteed to be pulling out all stops in a bid to win over both consumers and businesses alike.
MYOB is a leading business platform with a core purpose of helping more businesses in Australia and New Zealand start, survive and succeed. At the heart of MYOB is a customer base of 1.2 million businesses and a network of more than 40,000 accountants, bookkeepers and consultants, for whom MYOB delivers end-to-end business and accounting solutions. MYOB operates across four key segments: Small and Medium Enterprises (SME), Enterprise, Financial Services and Practice.