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A budget that provides the four ingredients for stronger economic growth

COSBOA notes that the 2019 Federal Budget is one of the best in recent memory in that it focuses on the four core ingredients of economic growth: increasing disposable income; improving workforce skills; improving infrastructure; and encouraging business investment. These foundations have been supported while also providing the first budget surplus since the 2008 Financial Crisis, a milestone that is grounds for strong optimism about Australia’s economic future.

The 2019-20 Federal Budget represents the first budget surplus in more than a decade, providing the opportunity for Australia to both reduce its national debt and invest in key measures to lift economic growth for the benefit of all Australian.

Peter Strong, CEO of COSBOA stated “We have collectively been labouring under an increased debt burden since the 2008 financial crisis and, like any household struggling with rising debt, this has drained positive sentiment and slowed economic growth”.

The persistent stories and national political comment about our national deficit drains the positivity from small business and their customers – business people become cautious about investment and households only spend on necessities.

Economists call this national emotion consumer sentiment and it tends to be negative when our national economy runs in constant deficit.

Mr Strong added “So, the fact that the Government has delivered the first national budget surplus in more than a decade – with forecast surplus’ into the foreseeable future – is the most pleasing outcome of this Budget. It is our strong hope that this achievement will lift business and consumer sentiment which, in turn, will drive increased economic and wage growth for all Australians”.

COSBOA notes that the Morrison Government didn’t just stop at achieving a surplus, they have used some of the surplus to invest in four major ingredients that are vital in growing our economy:

  • Increasing the disposable income of those who need it most: who can spend that money in the nation’s 970,000 small businesses

  • Investing in workforce skills and business innovation to ensure that our employees have skills that are relevant in a workplace that is continually being reshaped by technological and digital disruption, and that small and medium businesses are supported in embracing innovation via the national roll-out of the innovation games*.

  • Improving national infrastructure so that small businesses can receive and transport goods at the lowest possible cost and maximum service level for our customers

  • Continuing to help small business grow and invest by increasing the instant asset write-off (in both quantum and eligibility) and fast-tracking tax cuts for all small businesses earning up to $50M per year.

This is the fourth successive budget that has contained strong measures to support the growth of small and family business in Australia in what amounts to the Coalition government having put its money where its mouth is in recent years.

Mr Strong further highlighted “in any budget there are sometimes hidden gems and the funding of innovation games for small business is such a gem. Small businesses bought together to innovate with the best talent emerging from our education institutions, rolled out on a national scale. Excellent focus on the future.”

Mr Strong also added “The past few years have proven that an investment in small business is an investment in jobs and stronger communities and that is why we are very pleased with this Budget. We score this budget is an 8 ½ out of 10 from a small business perspective”.

Additional details to COSBOA 2019 Budget Release

This budget is strongly supported by COSBOA because it balances the need to return the national budget to surplus (after 10 long years of deficits) and to advance prudent measures that lay the foundations for stronger economic growth in the future.

There are four key measures that are strongly supported by COSBOA and these are briefly outlined below.

Increasing the disposable income of those who need it most

The budget includes tax cuts for those on the average wage and below.

While everyone would have like tax cuts – including small business owners, the slow wage growth has affected those on low incomes most.

This Budget rightly delivers increases in household disposable income to those who need it most – many of whom are small business employees.

Small business owners treat their staff like family and they have seen the pressure their staff have been put under due to some living costs (e.g. electricity) growing faster than their take-home pay.

But tough trading conditions have meant that few small business owners have been able to increase pay to their valued staff beyond modest CPI increases.

The low wage growth of recent years, largely due to slow economic growth since the 2008 Global Financial crisis, has required a change in traditional thinking about how tax cuts should be delivered.

The approach outlined in this budget means that many people working in small business will get more money in their pocket without increasing the wage bill for the business owner – and that is a positive outcome for both the small business owner and their staff.

Investment in workforce skills

Any small business owner will tell you that they are constantly trying to address the business challenges created by changing technology and the digital economy.

Successfully addressing these challenges means that small business must not only have employees who understand these challenges, but also possess the skills to help the business thrive in a changing marketplace.

The $525M investment in national workforce skills is an essential element in helping to equip both the current and future workforce with the skills needed to help small business succeed in the future.

The multi-faceted nature of the skills package – with its focus on increasing traditional apprenticeships and implementing new mechanisms to both identify and close skill gaps (i.e. the new National Skills Commission) – is both long overdue and very welcome.

The proposed national roll-out of the Innovation Games on a national basis over the next 2 years – a concept originally developed by COSBOA working in partnership with the Victorian Government and Paddl – is a very welcome initiative as the 12-month pilot of these games has provided tangible benefits to participating small businesses in terms of implementing innovative processes.

Essentially, the package outlined in the 2019 Budget lays the foundations for the development of an approach to “lifelong learning” that elevates VET as a strategic priority to sit alongside University Education as a tool for continually enhancing workforce skills.

In the face of disruption, VET cannot simply be considered as ‘apprenticeships’ – it must be embraced as a tool for ensuring that worker skills are supplemented throughout their working life to ensure that they remain gainfully employed in the face of changing skill needs.

The return to a focus on investment in workforce skills in the 2019-20 Budget is very welcome development given its absence in Federal Budgets over many years.

Improving national transport infrastructure

The Budget investment in transport infrastructure is also welcomed by small business as it delivers positive outcomes for small business in two ways.

First, improvements in passenger transport infrastructure means that it takes less time for employees to get to work and allows them to get home from work faster than they otherwise would.

This means that hardworking staff are less stressed when they arrive at work and the business is exposed to less disruption to customer service due to unforeseen traffic and transport delays.

The second benefit is one that is often missed as policymakers focus on the high-volume freight needs of big business and industry – but it is of vital importance to small business.

Small business is more exposed than most other businesses to road transport for both the receival of goods and the delivery of goods to local, national and international markets.

Increased traffic congestion increases the level of disruption to both receipt of sales inventory and the cost of goods delivery to customers (which are increasing due to greater use of internet shopping channels by small business in Australia)

The expansion of the NBN into regional areas – resulting in the strong growth of small business in regional and rural areas – means that delays caused by inefficient transport infrastructure is a growing issue for small businesses in both urban and regional areas.

While more will need to be done than is contained in this budget alone, the renewed focus on investment in urban congestion busting and regional highway improvement projects is very welcome.

Continuing to help small business grow

This is the fourth successive budget that has contained strong measures to support the growth of small and family business in Australia in what amounts to the Coalition government having put its money where its mouth is in recent years.

The support provided to small business in recent years has largely been responsible for the growth in employment in Australia and is a large part of the reason why we have maintained low levels of unemployment in the face of weak economic growth.

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