CCIWA Chief Economist
Today’s Federal Budget confirms Australia’s remarkable economic and fiscal turnaround, with the Government laying the policy groundwork for continued economic recovery. It aims to drive Australia’s unemployment rate below 5 per cent and enable the private sector to re-take the reins to spur the next phase of growth.
Australia’s GDP growth is expected to reach 4.25% next financial year, a substantial improvement on last year’s expectations. The deficit has come in at $161 billion, with the Government’s cash position improving by $37 billion since the Mid-Year Fiscal Update.
The turnaround is fuelled by a huge uplift in tax receipts from households, businesses and the GST, as well as declines in JobSeeker payments. Australia is approaching a gross debt of $1.2 trillion over the forward estimates, although record low interest rates and a growing economy means the debt burden as a percentage of GDP remains manageable.
To boost business investment, the Budget enables businesses to write off the full value of eligible assets purchased for an additional year until 30 June 2023. For the same period, refundable tax offsets for losses “carried back” to liability in earlier years can be claimed. The Budget forecasts that these incentives will drive business investment outside the mining sector to an optimistic 12.5% by 2022/23. CCIWA also recognises the importance of initiatives taken to diversify the Australian economy, including by encouraging investment in medical and biotech technologies through a patent box, and direct investment in the space sector as part of the Square Kilometre Array in Western Australia.
Assuming that closed borders will restrict skilled migration until mid-2022, there is a headline focus on COVID-related workforce challenges. The Budget aims to bolster participation and productivity, applying $1.7 billion to improve childcare affordability for families with two children, better supporting women’s return to the workforce.
Notably, the successful Boosting Apprenticeship Commencements program, a 50 per cent wage subsidy to help employers take on apprentices and trainees, has been extended for another six months. The funding committed to the JobTrainer program has also been doubled, extending the offer of free or cheaper training courses to eligible young people.
The Government’s initiatives to confront key workforce issues are particularly welcome in WA, where skills shortages are identified as our state’s biggest barrier to growth. However they are unlikely to fully address our State’s serious skills shortages. It remains vital that all levels of Government cooperate to help businesses get the skills they need, which will require access to overseas talent. Significant policy reform should still be pursued at the Federal level, including tax reform, further measures to enable women to re-enter the workforce after having children, and improvements to Australia’s system of industrial relations. CCIWA will continue to work with the Federal Government on these and other issues, to make WA an even better place to live and do business.
Full CCIWA analysis of the Federal Budget can be found at federalbudget.cciwa.com.