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Ai Group: Budget Stimulus Welcome in Slowing Economy

"The stimulus inherent in the Federal Budget is a timely and welcome boost for a slowing economy at a time of wavering business and household confidence," Ai Group Chief Executive, Innes Willox, said today.

"The return to surplus, albeit a skinny one, after more than a decade of deficits should be recognised. The budget also takes positive steps in the structural reform of Australia's income tax arrangements and further lifts investment in skills, infrastructure and assistance for new exporters. However, there are real risks around the disappointing cuts to permanent migration, in the modest improvement to the budgetary outlook and in the shortage of measures to substantially boost domestic productivity.

"Lifting household disposable incomes by combining additional tax relief with the Energy Assistance Payment will quickly put welcome cash in families' hands which will flow through to consumer spending and hopefully lift business sales and employment. Additionally, the increase in the Instant Asset Write-off facility for small and medium-sized businesses will stimulate investment and productive capacity while also lifting sales and employment for equipment suppliers.

"Looking further ahead, the additional structural reforms to the personal income tax scale represent important improvements that will lift incentives to save, work and invest across the bulk of income earners.

"Similarly, the Budget brings forward to 2021-22 the foreshadowed reduction in tax rates for small and medium-sized companies and unincorporated enterprises. This measure will underwrite a lift in potential of these businesses to deliver sustainable wage increases for their employees. It is disappointing though that Australia appears stuck with a two-tiered company tax structure.

"The increase in support for new apprentices – by lifting employer and apprentice incentives – is a particularly welcome initiative that will help address a number of skill shortages and help provide stimulating career paths for many young Australians. It is very pleasing that the Government has listened to industry concerns on our apprenticeship program.

"Ai Group welcomes the establishment of a National Skills Commission as recommended by the Joyce review to drive overdue and long-term reforms to the VET sector. A National Careers Institute will further create vital linkages between students, schools, training and industry.

"Strengthening foundation skills for at-risk employees through the new literacy, language, numeracy and digital skills program is a positive and timely step especially for people most at risk.

"Exporters and potential exporters will benefit from the increased allocation to the Export Market Development Grants (EMDG) program.

"The reduction in the permanent immigration intake is of considerable concern for the many businesses facing skill shortages across a wide range of occupations. Extending the reduction for a number of years carries risks and will lift the dependency on temporary migration.

"Caution should also be sounded over the modest outlook for the budgetary position over coming years. The Budget remains vulnerable to a downturn in general activity and particularly to a sudden fall in commodity prices. In this sense, the task of fiscal repair remains incomplete.

"The budget has taken clear steps to boost confidence and put the economy on a sounder footing, but it is fair to say that much work still needs to be done to boost productivity and build economic resilience. Industry looks forward to further policy announcements ahead of the upcoming Federal election," Mr Willox said.

Media enquiries: Tony Melville – 0419 190 347