Business groups have welcomed the fact that the Federal Budget will be back in surplus in two years, but say the Budget is light on for immediate support for SMEs who are operating in what remains a very patchy environment.
Jaye Radisich, chief executive of the Council of Small Businesses of Australia, says Treasurer Wayne Swan stuck to his promise that the Budget would contain few big-spending initiatives, but says the fact that the Government has continued to support existing SME assistance measures is positive.
“The up-side of the predictable Budget is that there is certainty for small businesses that can ill-afford more instability or change as they are recovering from the GFC,” she says.
“If the Australian economy is stable, the cost and availability of finance will be within reach for small businesses that need capital to grow or smooth cashflow – which our research indicates is the number one issue of concern for small businesses.”
However, she expressed some disappointment was the lack of efforts to streamline tax arrangements for sole traders and independent contractors, reform Australia’s complex trust system and improve the operation of Fringe Benefits Tax.
“A major concern for small businesses remains the disproportionately high cost of compliance when it comes to interacting with government.”
While Radisich was trying to see the positives, Russell Zimmerman, executive director of the Australian Retailer’s Association, was deeply unimpressed.
“The only headline small business initiatives in tonight’s Budget are nothing but recycled news from the Henry Tax Review announcement last week,” he said
“The decision to expedite a cut in company tax rate from 30% to 28% for small business was announced last week and will mean little for retailers who will also be hit with increased superannnuation payments for employees. The tax write-off for assets under $5,000 was also part of the Henry Review and like reductions in company tax, will not come into effect until July 1, 2012.
“Retailers who have been overburdened with regulatory changes would be disappointed they have not been recognised in tonight’s Budget announcement – they need a boost now, not in two years time.”
The Australian Industry Group was broadly supportive of the Budget and particularly the move back to surplus and the extra money for skills.
However, chief executive Heather Ridout says there are number of areas where the Budget falls short.
“It’s disappointing there are no new investments in business Research and Development and that the Government is persisting with the deeply flawed changes to the existing R&D tax credit. It is also disappointing the Government has cut the Green Car Innovation Fund by $200 million; this is short-sighted and will hurt our car industry which has worked hard to remain competitive through the Global Financial Crisis.”
The Property Council of Australia welcomed increased funding for infrastructure included in the Budget, while the Australian Bankers Association was very pleased with cuts to taxes on savings which will come into effect from July 2011.
Economists have welcomed the Budget’s cautious approach, although CommSec chief economist Craig James has suggested that the Government should have done more to take stimulus out of the economy and reduce the likelihood of rate rises.
“The Government believes that a no-frills, no-nonsense Budget is required. We beg to differ. Australia was successful in avoiding recession last year and, unlike other advanced nations, is not weighed down by huge deficits and debits. We should be building on that success. Spending should be cut, not curbed, so that the Reserve Bank – and home-buyers – don’t have to shoulder the burden.”
James argues the Government’s spending measures introduced since November last year have actually increased the Budget deficit by $3 billion, and Government policy will have little to do with getting the Budget back in the black.
“The Budget deficit is tipped to improve by over $16 billion next year, but none of the improvement is due to Government efforts. The deficit is expected to improve by over $31 billion in 2011/12 and only $600 million of that is due to Government.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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