Thursday, June 20, 2024

Federal Budget 2022-23 handed down in testing economic times

Industry bodies have commended the federal government’s first budget for its social reforms, including greater access to child care and paid parental leave, which will help families with the rising cost of living amidst an uncertain global economic outlook.

“The Albanese Government’s first budget has been handed down with a backdrop of increasing global economic uncertainty and growing cost of living pressures. Inflation is forecast to peak at 7.75% later this year and our economy is set to slow to 1.5% growth in 2023-24, highlighting the scale of the challenges that lie ahead for business and all Australians,” says Australian Retailers Association CEO Paul Zahra.

“With many households facing financial stress, we’re pleased to see the cost of living a key focus. The $7.5 billion package which includes cheaper child care and the expansion of paid parental leave will help ease the pressure on families and improve the economic participation of women – a key focus for retail, given the sector has one of the highest percentages of women in its workforce. We commend the Government for embarking on these bold social reforms and for making women and gender equality a budget priority.

“The more immediate challenge for retail is the jobs and skills crisis, which is worsening in our sector with job vacancies at over 46,000 and one of few industries that recorded an increase in vacancies last quarter. We acknowledge the $1 billion agreement to provide 180,000 TAFE and vocational education places in 2023 but seek clarity on how these will target traditional retail skillsets.

“We note that the Government is following through on its commitments out of the Jobs and Skills Summit, including funding to speed up visa processing times, and allowing pensioners to earn more without their entitlements being affected. These are positive measures that the ARA has been advocating for to get more people into the country and to harness the existing talent we have here now,” he said. “Many small businesses are significantly challenged with rising costs, and while we acknowledge the $62.6 million in grants that have been announced to help SMBs become more energy efficient – we would like to have seen more targeted support to help these businesses with cash flow challenges. Continuation of the instant asset write-off and 20 per cent tax deduction boost for small businesses to upskill employees and support the uptake of new technologies will also help improve digital capability and productivity.

“The ARA has welcomed the paid family and domestic violence leave as another important area of social reform. We also advocated for and welcome the $3.4 million over four years to support small businesses to understand and implement this legislation.

“The next great disruptor for the retail sector and the Australian economy is climate change, and we welcome the resilience measures in this budget to help with climate change and disaster preparation, as well as changes to support electric car use by business and the community,” he said. “While the retail sector overall remains resilient, we are cautious about the economic outlook as the impacts of rising interest rates wash through the economy and as households tighten their budgets, which could lead to a slowdown in spending in 2023.”

Australian Food & Grocery Council CEO Tanya Barden says the Albanese government’s first budget shows a focus on rebuilding Australian industry, which has faced extraordinary challenges in recent years from Covid-19, natural disasters and global supply chain disruptions.

“The Albanese government’s focus on investing in industry, regional growth and building the skilled workforce of the future is welcome,” Ms Barden said.

“The government’s $15 billion National Reconstruction Fund is a recognition of the critical importance of domestic industry and sovereign manufacturing capacity to Australia.

“The AFGC represents Australia’s $133.6 billion food and grocery manufacturing industry – the largest manufacturing sector in the country – and we look forward to working with the government to help create the strong manufacturing capabilities that will secure the nation’s future.”

Ms Barden said a number of measures in the budget will support a stronger manufacturing sector, including:

  • $135.5 million over four years from 2022–23 to develop domestic manufacturing capabilities and skills, including $17.2 million for a pilot Food Manufacturing Innovation Hub in NSW;
  • An increase in permanent migration levels from 160,000 to 195,000, which will help ease critical workforce and skills pressures currently confronting industry;
  • Support for regional skills by helping apprentices in regional and remote Australia under the Australian Apprenticeships Incentive System; and
  • Supporting investment in regions, where 40 per cent of the food and grocery manufacturing workforce is based.

Ms Barden said: “We must invest in skills for the future, in a digitalised, advanced manufacturing industry that is resilient and internationally competitive.”

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson says the Budget handed down by the Australian Government will provide welcome capability building, mental health and financial advice support for small businesses and incentives to grow, transform and become energy efficient.

Mr Billson said the combined $15 million in the budget for mental health and financial counselling support was really important.

“For many small and family business owners, their identities are interwoven into their business and the stakes are so much higher than just a job. Many people have invested a lifetime, and in some cases their family home, into building up their business, which amplifies the emotional challenges,” he said.

Mr Billson said while that support was extremely welcome, it has been partly paid for by redirecting $8 million announced in the March budget for the My Business Future program.

The extra childcare funding will particularly support the growing cohort of female entrepreneurs starting or leading a new business in recent years.

Along with the one-off incentive for older Australians to work more hours without losing benefits it will also go some way towards helping mitigate skills shortages and the extra fee-free TAFE and vocational education places will address some of the longer-term skills challenges.

“Small and family business owners are literally exhausted. They are struggling to make rosters work and keep doors open due to labour and skills shortages; grappling with supply troubles that means critical inputs, goods and services are not always available, on edge about cyber security fears and some are fighting floods and other natural disasters,” Mr Billson said.

The Budget forecast that inflation will be 7.75% at the end of this year and still high at 5.75% by the middle of next year and 3.5% in mid-2024, tells small and family businesses they will face sustained cost pressures on their businesses.

At the same time, the Budget forecast of lower economic growth and a rise in the unemployment rate, plus the likelihood of further interest rate rises from the Reserve Bank, show conditions will be more challenging.

“Small businesses have a proven track record of lifting our nation. Remember, coming out of the global financial crisis, almost 60% of the new jobs were created by small employers even though the sector only accounted for 40% of the workforce,” Mr Billson said.

“We continue to urge the government to support small businesses and believe energising enterprise can deliver a stronger economy.

“Small business is a dynamic and fast-growing sector that allows people with an entrepreneurial spirit to pursue their dreams and energising this will help increase the $438 billion contribution small business makes to the economy.”

Franchise Council of Australia CEO Mary Aldred says, “98% of businesses in Australia are small and medium sized enterprises and franchising is the predominant business model in the sector”.

“As identified in our September ‘Pulse Check’ survey, franchised small businesses are contending with inflationary pressures, supply chain risks, increasing interest rates and, most critically, workforce shortages,” Ms Aldred said.

“This budget delivers a range of direct and indirect benefits for small businesses in four key areas, namely: measures to address workforce shortages, improved internet connectivity, small business mental health support and support for small businesses to become more energy efficient,” she said.

“The economic picture presented by the Budget is delicate. Regulatory overreach in areas such as industrial relations represent a threat to the confidence and operations of small businesses.

“We look forward to working with the Government to build on this Budget and address the challenges facing franchised small businesses across Australia”, Ms Aldred said.

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