We’re now in the countdown to 2021/22 Federal Budget to be delivered by the Treasurer on 11 May and business owners will be watching, waiting and wanting a good outcome. Facing a massive COVID-induced deficit, there was conjecture over whether the Morrison Government would hold fast to the traditional ‘no deficit’ approach or put that aside and continue to spend to support the economy. Prior to making his official pre-budget speech on 29 April, the Treasurer, Josh Frydenberg, was quick to confirm that this would not be an austerity budget. The Government would take the approach that repairing the economy to repair the budget. More info. With the 2020/21 delayed budget effectively only 6 months into its duration, businesses are still taking advantage of many of the key measures introduced. From a lender’s point of interest, we single out the accelerated asset depreciation. The Instant Asset Write-off and temporary full expensing are available through 2021/22 for eligible businesses and offer significant tax deductions. To take advantage of these measures in the current financial year, you would need to purchase and have the assets operational in the business by EOFY. Our Business Finance consultants can arrange finance quickly to expedite the purchase process. While details on any similar measures were not included in the Treasurer’s speech, the flow of budget lead-up reveals has started to flow. Tax relief has been announced for the small brewing and distilling industry. Much welcomed, it comes in the way of an increase in the excise refund cap from $100,000 to $ $350,000. What else may be in the budget? Here’s a summary of what the Treasurer said in his pre-budget speech.

Pre-Budget Treasurer Speech: Summary

While dubbed the traditional pre-budget speech, the speech is officially entitled Fiscal Strategy Update and overviewed the Government’s next phases in the economic recovery plan for the country following the COVID-19 recession. The Treasurer provided background by noting the economy’s position prior to the pandemic, especially how the budget was back in balance and spending controlled. He went through key points of the Government’s response to the COVID-19 crisis, quoting forecast and real GDP figures and the unemployment rate at various time points. He noted the measures taken by the Government in stimulus and support – around $314 billion. Support which has been funded through borrowing by the Government. Despite the support provided and the cushioning that support created, the Treasurer acknowledged there would be long term effects to both the economy and the budget position. He discussed the effect of the expected slow-down in population growth with the decline in migration as a result of the international travel situation and the impact this is and will have on the economy in many ways. In outlining the fiscal strategy (upcoming budget) the emphasis was clearly stated as being on jobs and growth and would be a two stage approach. He said it would be unrealistic to target a budget surplus, saying the 2021/22 budget would blend elements of the pre-COVID fiscal strategy with new elements to address the current realities. The first phase focuses on boosting both business and consumer confidence and promoting growth and jobs. He said this would be achieved through a number measures and specifically mentioned was a continuation of provision of targeted, proportionate, temporary support including through tax measures to promote private sector investment and jobs. Mention was given to securing reliable and affordable energy. The Treasurer is looking to a reduced level of unemployment, some surmise even in the sub 5% range, before moving into Phase 2 of the fiscal strategy. While no specifics were detailed, the key area of focus in this phase will be continued focus on jobs and growth. Reveals will likely continue to be unveiled in the final days before 11 May and we will be across the detail.

Other Considerations

From our point of view as a lender, Business Finance looks to the budget for benefits and advantages for our customers to particularly invest in new assets. But for indicators around what might happen with interest rates, the focus is on other indicators and stats which are revealed on a regular basis. In particular, at the moment are the inflation and unemployment figures. The RBA has stated that it is looking towards inflation in the 2-3% range and unemployment much lower than the current level before considering lifting interest rates. The March quarter inflation figures were announced in late April and show that inflation is still in the mid 1% range. Well off the RBA’s target. Slow wages growth in Australia has long been flagged as a concern but there is a new trend emerging which may have an effect in that space. Many employers have reported difficulties in filling job vacancies, with labour shortages in many industries as a result of international border closures in particular. According to economic theory, when supply is limited, prices increases. So will wages need to be increased to attract staff to these jobs? If so, will any growth only be in certain sectors and will it be sustained over a significant time period? The pandemic has certainly thrown up multiple issues for policymakers to take into account and for businesses to consider when taking on finance. Contact 1300 000 033 to discuss how we can tailor a lending package to meet your requirements DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.