The recent Federal budget has been well received and is generally being seen as appropriate for the times in its scale and coverage of many business sectors and social service areas. The Morrison Government has stated that its aim with this budget is to lock in the post COVID economic recovery now well underway with many regions including Port Macquarie experiencing very good business conditions.
Some of the budget highlights include tax relief for small and medium businesses with rates dropping to 25% from 1 July 2021 and the continuation of instant asset write-off up to $150,000 in value. This means businesses can re-invest the savings from a lower tax rate into increasing productive capacity or employing more people with confidence that this investment is immediately tax deductible.
Other measures include more personal tax cuts for low and middle income earners which will encourage household expenditure and aid the retail sector in its recovery. This lower tax environment for individuals and business is a very deliberate and positive strategy to grow the economy, the government revenue base and thereby reduce debt more quickly.
The lack of immigration and international workers has had a significant impact on the labour market with employers reporting shortages of skilled and professional people across many industry sectors. The recent dip in unemployment to 5.5% seems to be reflective of the tightening labour supply amid a strong economic recovery. Further evidence of the labour shortage is that “underemployment” has now dipped to 1% below the pre-pandemic levels indicating that more people are also getting increased hours to compensate for the lack of available workers.
The budget included $2.7Bn over the next four years to fund subsidies to businesses who employ apprentices and trainees. This funding is squarely aimed at addressing the skills shortage across mining, manufacturing and construction industries. Its effectiveness will rely heavily on the availability of willing trainees and uptake by employer groups.
Lyne MP, David Gillespie was successful in securing $48m for the Harrington-Coppernook overpass and has also flagged an upgrade to the Oxley Highway interchange at Port Macquarie amongst several others in the vicinity. Ongoing road infrastructure improvements funded from local, state and Federal is critical to continued economic growth as regional business relies heavily on road transport.
The post-budget Federal Government announcement of a $600m gas fired power plant at Kurri Kurri in the Hunter is a welcome initiative that will provide affordable and reliable power supply for NSW business and heavy industry. This new power generation plant is to replace the capacity that will be lost after the closure of Liddell Power Station and is a very pragmatic transitional approach to ensuring reliable and affordable supply to the grid.
To highlight the need for this new gas fired power station Tomago Aluminium smelter has recently had several forced shut downs due to power price spikes and the need to preserve supply to the rest of NSW. A reduction in reliable base load power supply could ultimately result in the closure of Tomago which is Australia’s largest aluminium smelter employing 950 people. A spokesman for Tomago has said publicly that with the current renewable technology the largest battery in Australia would only run the aluminium plant for 12 minutes which is clearly not viable.
For the private sector to be successful governments need to provide a low tax, minimal intervention environment, key policy certainty (the case in point being energy policy) along with funding and delivery of major infrastructure. The budget and recent announcements demonstrates a recognition of this and support for continued business recovery post COVID.