Federal Treasurer Jim Chalmers has just released his first budget, and the consensus is that it is essentially a ‘safe’ budget.
There are not too many winners, however, the expectations were low considering the status of the worlds major economies and inflation rates not seen since the 1990s.
While Australians debt continues to grow ($36.9 Billion 2022-23), it is important to put it into perspective. Our net debt to GDP is expected to be 23% in the current year and rise to 28.5% by 2025-26. Therefore, comparatively, our economy is stronger than most other countries around the world.
The greatest risk to the budget is the record high resource prices which underpin keeping the debt position in check.
FY22-23 deficit is forecast at $38 billion with a net debt at 23% of GDP.
- $20 billion to upgrade Australia’s electricity grid to connect with renewable energy
- Additional support for natural disasters
- Further investment and reform of child care and paid parental leave schemes
- Subsidised medicines ensuring those who need medication can afford it
- No change to legislated stage 3 tax cuts for individuals
- Delivering 480,000 free TAFE positions
- Tax cuts to promote the move into electric vehicles if total cost under the luxury car cost thresholds
- Continued investment in NBN and connectivity
- Increasing costs from NDIS questioning the sustainability of the program
- National Housing Accord which plans to build 1 million new houses over the next 5 years (will this assist or simply drive house prices further through Government intervention?)
- $38.3 billion being spent on defence during these economically challenging times
- What’s plan B if record commodity prices fall?
- Electricity costs to skyrocket by as much as 50% over the next 2 years
Where are your tax dollars being spent?
What does this budget mean for Small Businesses?
Unfortunately, many SME operators would be feeling underwhelmed by the budget. There are hardly any measures implemented to assist small business owners who have battled through the last few years.
- Budget allocation of only $42m to accelerate skilled Visa processing
- Lack of measures to assist small businesses with crippling staff shortages despite the previous Government contributing to these shortages
- Only $15.1 million allocated to the mental health and debt counselling services for small business owners
- A number of state and territory-based business grants many delivered through COVID-19 hardship measures are now being classified as non-assessable and non-exempt income for tax purposes
- Temporary full expensing of business assets will not be extended beyond 2023
While it was always going to be a cautious budget, the support for small and medium sized business operators was minimal. The cost of doing business has increased significantly and staff shortages are resulting in many business owners selling or closing down.
While the argument that spending more during inflationary periods only builds on the inflationary pressures, maybe the allocation of spend could have been more favourable to the small business operators underpinning the economy.