Get smart

Agent 86, aka Wayne Swan, like Maxwell Smart, will have to rely upon dumb luck and Agent 99, aka Glenn Stevens, to deliver a change in electoral fortunes for his chief.

Only a further couple of mortgage rate cuts will be seen to justify the cash splash and cancellation of the corporate tax cuts by the Gillard government.

In the next three months, Agent 99 will be head of CONTROL, seeking to establish the prospects of European Chaos, collapsing commodity prices, China curbing seaboard city growth and the chances of further interest rate cuts bringing the $AUS down below parity with the $US.

Forget the Thomson/Slipper continuing sub-plot and focus upon the very real possibility of an end of year mini-election budget that addresses housing affordability and training allowances for long-term unemployed.

This budget represents the adoption of significant reversal of public sector expansion and a commitment to go beyond returning the budget to surplus towards guaranteed claw backs in government services for the next three years.

Agent 86 says in the budget papers that he expects to receive reports from five bodies set up to examine tax reform by the end of this year. The tax road map projects a further rise in the tax-free threshold to $21,000, cuts to the interest withholding tax for financial institutions down to zero and support for credit unions and not-for-profit service organisations.

As Judith Sloan points out in The Australian:

“The government’s policy is to run with a balanced budget over the course of the business cycle. But the first chart in the budget overview document looks very lopsided in terms of the negative underlying cash balances recorded for 2008-09 to 2011-12 and the small positive balances projected for the next four financial years”.

Swan implicitly accepts that it is not only supposed to be a tough budget, but that his commitment to free up space for the RBA without further direct support for small business enterprise, will lead to a rise in unemployment and an increase in business insolvencies.

The budget recognises that small businesses are battling against the high dollar and weak consumer sentiment by offering loss-making small businesses the ability to  “carry back” their losses, allowing them to receive a refund from taxes paid in the previous year.

This concession is forecast to cost $714 million over the next four years to help firms facing a liquidity crunch; and failures of lenders to give them “carry-forward” funds comes into force at the same time as previously-announced tax breaks that will allow small businesses to claim hefty write-offs on new equipment or cars.

All this is small compensation for the $4.6 billion of the promised company tax cut over the next four years.

Rising levels of consumer and business confidence leading to a further deterioration of the nation’s terms of trade, at the same time as a turn-down in mining and exploration flows into the economy, could well force a total revision of last night’s short term horizons.

Which brings us back to the chances of a mini-budget at the end of the year if the RBA does not accept that the tough budget is being maintained in terms of the States’ infrastructure expenditure and international currency traders keeping our patchwork economy in chaos.

Smart companies will wait and see if households continue to pay down debt or begin to revisit deferred consumption intentions before considering taking on new staff and commitments.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.

Trending

COMMENTS

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments