A confidence bet

Federal Budget Brief 2015

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The Federal Government has bet that a modest package to stimulate confidence in the small business sector will ignite an economy slow to respond to monetary stimulus.

The Budget is targeting a significant refocus of the future growth of the Australian economy, with predictions that 84% of contributions to the economy will come from non-mining investment in the next three years. 

Welcome measures include less of a focus on expenditure restraint and more investment to improve productivity and participation. Very small and emerging businesses receive differential attention with:

  • Tax cuts
  • Accelerated depreciation
  • Immediate deductions for startups
  • Less red tape

Suppliers to these businesses will benefit from the trickle-down effect.

At the same time, the Budget has a strong emphasis on countering tax avoidance by multinational businesses. It also includes draft law to level the playing field for goods and services tax (GST) between offshore and local digital content providers. However, the Budget is relying on heavy lifting from forces that are either outside its sphere of influence or through its own inactivity.

The inflation rate is impacted significantly by lower oil prices. Growth depends on the improving economic conditions of our major trading partners and revenue is being funded by bracket creep.

In addition, this Budget leaves the settings for big business largely unchanged. Interest and currency rates may not be enough to switch on big corporate investment.

The question remains: will the big end of town have sufficient confidence to engage in the investment the Government is betting will replace two-thirds of the mining contribution?

Against the backdrop of a challenging world economy and high local unemployment, the odds do not appear to be favourable.