17th March, 2022
With under two weeks left until the Federal Government releases its annual Budget announcements, accountants are looking for meaningful help for clients.
As Australia edges closer to the release of 2022-23 Federal Budget, all eyes are currently on Treasurer Josh Frydenberg, who has stated that this year’s Budget will feature a curb on Government spending in a bid to allow the economy to begin a journey of fiscal recovery from what has been dubbed the ‘COVID-19 spendathon’.
Earlier this year when discussions were unfolding about the taxation status of Rapid Antigen Tests purchased and distributed by businesses, the Treasurer announced that going forward, he intends on “drawing clear lines in the sand” when it comes to business support.
The Treasurer flagged that while it was important for the Government to provide assistance to businesses throughout the pandemic, this level of aid could not be sustained in the long term and would therefore be pulled back as the country learns to live with COVID-19.
Notwithstanding the Treasurer’s intention to rein in Government spending, Frydenberg also set aside $16 billion for spending on a series of initiatives in his mid-year update, several billion dollars of which is currently being rolled out, weeks ahead of the 2022-23 Federal Budget release on 29 March, the Sydney Morning Herald reports.
Some of this pre-Budget Government spend includes financial support for Ukraine and incentives for aged-care workers.
Despite the Treasurer’s statements pertaining to a general winding back of business support across the board, a survey sent out by peak accounting body CPA Australia showed that more than half of its membership believe that business support should still feature in the Budget.
Some of the survey respondents even stated that non-financial support should also form part of this year’s announcements, while fewer than 10 percent believed that additional financial support was necessary at all.
According to Gavin Ord, senior manager of business policy at CPA Australia, the survey is a clear indication that some Government handholding is still warranted as the economy recovers from the pandemic-driven recession.
“It’s looking increasingly likely that many businesses will experience ongoing disruptions for the whole of 2022, and potentially beyond,” Ord said in a recent statement.
“Ultimately the government needs to balance the cost of providing business support against the benefits and risks of doing nothing.
“On balance, we think the benefits of providing additional support for business in the budget outweigh the risks.”
In its submission to the Federal Government ahead of the Budget, CPA Australia highlighted five areas it implored the Treasurer to consider when finalising this year’s Budget, each of which formulated based on the needs put forward by accountants across the country.
The five recommendations included a renewed focus on digital transformation initiatives, the avoidance of regulatory changes, access to business advice, expansion of the skilled labour pool, and the prioritisation of economic growth over paying down Government debt.
Much of CPA Australia’s submission focused on the impacts that COVID-19 continues to have on the economy, creating the need for ongoing business support.
“While we’re not opposed to direct financial support in some circumstances, we think the best approach is to use the budget to better prepare business to manage future crises and position them for growth,” Ong said in a press release announcing the recommendations.
“The economy faces its own version of “long COVID” if support isn’t available to help businesses manage future outbreaks.”
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The Federal Budget will be released with the backdrop of Australia sitting on some of its highest debt levels in history, with the debt forecast for the 2024-25 Budget being close to $1 trillion – a far cry from Australia’s net-negative debt position in 2008.
But top economists around the country have stated that the Government’s focus need not necessarily be as much about the amount of debt, as much as it should focus on the sustainability of the debt levels.
According to Ernst & Young’s Chief Economist Jo Masters, as long as the economy is given the space and tools needed to grow at a fast pace, the debt levels would appear to be manageable.
“To tackle nearly $1 trillion of debt over any meaningful time horizon requires productivity-enhancing reform to raise the speed limit of the economy so that we can push growth higher without hitting capacity constraints,” Masters told The Sydney Morning Herald.
The belief that carrying a certain level of debt while investing in building out the capabilities of Australia’s economy aligns with the recommendations put forth by CPA Australia, which centred around the importance of taking a balanced approach with a mixture of short-term business support and long-term economic transformation.