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Pitcher Partners summary sees businesses needing to fend for themselves

INDUSTRY analysts at Pitcher Partners, in their overview of the budget, said it “will do little to fuel investment or growth.”

In its report, Pitcher Partners said confidence was also not going to be helped by the forecast that wage increases are to exceed CPI across the forward estimates.

“Unemployment is predicted to remain flat — the only positive for business lies in the forecast reduction of inflation, which is expected to settle at 3.5 per cent this financial year before falling into the 2-3 per cent band sought by the RBA from 2024-25,” it said.

“Apart from some minor other measures, that’s the extent of any largesse for business. GDP is expected to bounce between 1.75 and 2.75 for the next five years, and this budget will do little to fuel investment or growth.” 

On a cautionary note, it said the “sleeper issue” for business will be access to labour – a challenge that is not unfamiliar to business, but which has not attracted huge attention in the lead-up to the budget.

“The budget forecasts indicate that overseas migration will reduce by 110,000 people over the forward estimates from July 1, 2024. 

“While almost 80 per cent of the permanent migration program will be allocated to skilled visa categories, the number of inbound workers will be significantly restrained.

“On the other hand, the tax cuts are forecast to be a net positive for labour supply, with the government anticipating 930,000 extra hours worked a week, equivalent to 25,000 full-time jobs, as women and individuals on low-to-middle incomes increase their participation.”

Pitcher Partners said that while productivity has grown in the last two quarters “and is expected to continue to as economic conditions improve, it remains a key concern for middle market business leaders, as revealed in our latest Business Radar survey in February 2024.”

In the survey, 52 per cent of business leaders said they are extremely or very concerned about the levels of productivity in their business.

“It remains to be seen whether the federal budget will deliver changes to sustain this trend,” the report said.

“Ultimately delivering policy to support productivity improvement is a better way to repay debt and balance the books than introducing new taxes.” 

For business it was a case of another year, another set of missed opportunities for business investment or visionary government policy to transition the Australian economy.

In its summary, Pitcher Partners said the small business instant asset write-off will be extended for another year and is capped at a very modest $20,000, for businesses with turnover of less than $10m.

“As the legislation for a similarly modest amount last year remains stalled in Parliament, with just six weeks to go to the end of the financial year, it is unlikely to get business investment engines revving,” it said.

“A million smaller businesses can expect an energy rebate of $325 on their electricity bills throughout the year, but that is roughly half the payment of last year.

“In contrast, the average annual electricity bills for business increased nationally by $540 between October 2022 and October 2023, according to Energy Consumers Australia.”

AADA says changes welcome

THE 2024-25 federal budget, dismissed by some industry bodies as lacklustre and missing some key incentives for economic growth, has at least won favour from the peak body representing franchised new car dealers.

The Australian Automotive Dealers Association (AADA) said it contained some “welcome measures for our industry.”

AADA CEO James Voortman said these measures included $60 million for the dealer charging fund which he said will help new car dealers with installing EV charging infrastructure in their businesses in support of the transition to selling and servicing electric vehicles.

In addition, the budget announced $3 million to implement the government’s response to the Review of the Franchising Code of Conduct, which will be used to investigate the feasibility of a licensing model and remake and update the code prior to its expiration in April 2025.

“These are important investments in supporting Australian new car dealers as employers of over 61,000 people, particularly as we head into a period of unprecedented structural change in the industry,” said Mr Voortman.

James Voortman

James Voortman

“While the AADA would have liked to see a resurrection of the previous scheme, we welcome the 12-month extension of the current small business instant asset write-off scheme.”

In contrast, he said the budget highlighted the continuing impost on Australian drivers through automotive taxes such as the luxury car tax and passenger vehicle tariff.

He said the government is estimated to collect almost $1.7 billion this financial year from these two taxes alone.

“We consider these to be outdated taxes, which are a relic from an era when Australia manufactured vehicles here,” Mr Voortman said.

“Particularly the luxury car tax which often applies to more efficient vehicles and applies to optional features which discourage consumer uptake of safety features.”

Mr Voortman said these figures highlighted recent calls made by the AADA for Australia to embrace a comprehensive review of automotive taxes, particularly as it seeks to accelerate the uptake of EVs and low emissions vehicles.

VACC says it is a significant budget for auto industry

THE 2024-25 federal budget is one of the most significant for the retail auto sector in recent years, with benefits including the imminent rollout of a New Vehicle Efficiency Standard (NVES) and anticipated rise in EV uptake.

The Victorian Automotive Chamber of Commerce said the budget recognises the transitional support the auto sector needs to adjust to a changing business environment.

“From support for skills and training to funding for EV charging infrastructure and new training facilities, the budget represents a win for our members,” it said.

“This outcome is the culmination of efforts by the MTAA and state/territory MTAs both of which undertook intensive engagement with the government in the lead up to the NVES finalisation as well as this budget, participating in more than 60 meetings this year alone.

“While the government has not responded to all of our requests, this budget is a good start and we will continue to engage with the aim to secure our outstanding asks over the coming months.”

The VACC highlighted automotive sector announcements in the budget. These included:

  • $84.5m to implement the NVES and establish a regulator to administer the NVES, including capturing emissions data, establishing a credit trading platform and undertaking monitoring and compliance activities
  • $3m for Franchising Code of Conduct changes, including by investigating a licensing model and remaking and updating the Franchising Code of Conduct before it ceases in April 2025
  • $50m for New Energy Training Facilities. Capital and equipment investment fund to be established for facility upgrades to expand clean energy training capacity for a range of energy sectors as well as key electrical and construction trades
  • $60m EV Charging Fund to help automotive businesses install EV chargers on their premises
  • New Energy Apprenticeships Program expanded. More apprentices and employers will be eligible for grants and wage subsidies from June 1, 2024. If eligible, an apprentice can receive up to $10,000 during  their apprenticeship. An eligible business can receive a wage subsidy of: 10 per cent of apprentice wages for the first 24 months (up to $1500 per quarter); 5 per cent of apprentice wages for the third 12-month period (up to $750 per quarter), with eligible apprenticeships to include automotive electricians,  motor mechanics and vehicle body builders among others.
  • $1500 reimbursement for Group Training Services. Support for small and medium businesses taking  on clean energy apprentices through access to Group Training Organisation services, with up to $1500 in annual reimbursements over the life of an apprenticeship. $265.1m for additional Australian Apprenticeships Incentive System support where apprentices training in priority areas will be eligible  for an additional $2000 ($5000 in total) to assist them to undertake and complete their training. 
  • Support for SMEs in this year’s budget is limited with only a modest set of initiatives. These include the instant asset write-off extended until June 30, 2025, allowing businesses with a turnover of less than $10 million to claim $20,000 from eligible assets; and an Energy Bill Relief Fund will provide $325 energy rebates to one million businesses on small customer electricity plans to help cover their electricity bills.
  • Tariffs abolished from July 1, 2024. The government will abolish 457 nuisance tariffs to simplify Australia’s trade system and cut compliance costs for businesses.

MTAA sees upside for auto industry

MTAA chief executive Matt Hobbs said the government recognised the importance of assisting the automotive sector as Australians begin the transition to electric vehicles.

He said the budget commitment of $60m for chargers at retail automotive premises was an important first step in getting dealers and repairers EV ready while driving private investment in the sector.

In parallel, the $84.5m fund to implement the NEVS with a new regulator and platform to administer the scheme will ensure the needs of the sector and government are met in a changing industry environment.

Matt Hobbs

“The MTAA has consistently advocated for assistance to prepare its members for the transformation taking place in the automotive sector, and the Australian government has listed,” Mr Hobbs said.

“The budget is the first one in recent years to acknowledge the challenges facing automotive retail businesses and shows the Australian government understands what’s required to prepare Australia for an EV future – skills, infrastructure and investment – and we commend them for the forward thinking demonstrated through this budget.

“With the automotive retail sector predominantly made up of small and medium size businesses, our members are engaging with Australian consumers everyday as they turn to newer, cleaner powertrains for their daily drive. It is therefore good news for industry, and for all Australians.”

Federal government initiatives announced in the budget of which the automotive industry stands to benefit also include:

  • $10,000 in grants for apprentices working with EVs and wage subsidies for their employers.
  • $50m capital and equipment investment fund for facility upgrades to expand clean energy training capacity.
  • $30m for a clean energy teacher, trainer and assessor workforce.
  • $1500 in annual reimbursements for employers accessing Group Training Services for their clean energy apprentices.
  • $55.6m for the Building Women’s Careers program supporting women to enter male-dominated industries and address critical skilled staff shortages.
  • $265.1m to supply additional targeted support under the Australian Apprenticeship Incentive Scheme.

“This budget lays the foundation for a cleaner energy future for the automotive sector who wish to make their contribution to reducing emissions by supporting more greener cars on the road,” Mr Hobbs said.

“While this budget is certainly a big step in the right direction, there is more work to be done to ready Australia for an EV future and realise its net zero objectives.

“One area that requires urgent reform is the luxury car tax, yet disappointingly the government is penalising everyday family hybrids with a tightened fuel efficiency threshold from July 1 – such a move makes no sense when the aim is to encourage more households to shift to lower emission vehicles.”

AAA says govt missed a chance

The Australian Automobile Association (AAA) said it welcomed increased road safety investment but questioned the government’s failure to address escalating transport costs and the growing inequity of Australia’s transport taxation system.

The AAA said the government’s increased funding for road safety programs and its funding of road trauma data collection are an appropriate response to the nation’s worsening road safety crisis. 

But it said the budget’s broad cost-of-living focus stopped well short of addressing the sharp growth in transport costs for families, which rose 10 per cent in the year to March 31.

The AAA’s quarterly Transport Affordability Index, published last week, shows the typical family is spending about $450 a week on transport, with the biggest rises recorded in the cost of new cars and increasing car loan payments.

The AAA notes import tariffs and luxury car taxes introduced to protect the now-closed Australian car manufacturing industry will raise $1.69 billion in 2023-24.

AAA managing director Michael Bradley said: “These legacy taxes have outlived their original purpose and today are adding to the cost of cars being bought by Australian families and fleets.

“Abolishing these protectionist measures must form part of a broader reform of tax arrangements, which should seek to ensure all Australians pay their fair share toward the upkeep of the road system and spread the cost burden more evenly across the community.”

The budget shows as more Australians shift to electric vehicles, fuel excise receipts will fall, and a declining proportion of Australians will shoulder the burden of funding the construction and maintenance of Australia’s transport network. 

The budget also says the government’s proposed New Vehicle Efficiency Standard will result in a $470 million reduction in fuel excise collections over its first three years of operation.

Mr Bradley said: “It was disappointing that Australians heard nothing about the government’s plan for a more affordable, sustainable, and equitable system for paying for our roads, given the High Court last October supported the commonwealth’s moves to prohibit states from levying road-user charges.”

The AAA is also concerned that only 77 per cent of fuel excise collected over the next four years will be re-invested in the transport network – down from the 85 per cent announced 12 months ago.

While the AAA is pleased to see investments of $561 million and $3.4 billion in the Black Spots and Roads to Recovery programs respectively over the forward estimates, the AAA notes the commonwealth’s total land transport funding allocation for the years 2023-24 to 2026-27 fell by $3.3 billion, to $52.6 billion.

The AAA is especially pleased to see $21 million allocated to ensuring the commonwealth can collect and report critical road trauma data currently held by state and territory governments.

Mr Bradley said: “The AAA commends the commonwealth for its leadership on this matter, which will save lives and increase transparency regarding how the government invests taxpayers’ money on roads.

“This important reform will ensure that scarce government funds are in future directed to where they will have the most effect.”

The AAA also welcomes the government’s funding commitments to EV recharging infrastructure and will be seeking further clarity about the scope and scale of these investments. 

Mr Bradley said: “The government is right to be encouraging the uptake of new technologies and more fuel-efficient vehicles, but Australia’s EV recharging shortcomings are currently a major inhibitor to take-up.

“The AAA looks forward to understanding how the budget’s relevant allocations will deliver the charging infrastructure Australian motorists need, where they need it.”

The AAA also welcomes the budget’s four-year $100 million active transport commitment, which has the potential to help reduce urban congestion and assist with the government’s emissions abatement targets. 

Engineers back the budget

ENGINEERS Australia has come out strongly backing the federal government’s budget funding announcements to accelerate the transition to net zero through support for solar, hydrogen, critical minerals, and batteries.

In a statement, EA CEO Romilly Madew said clean hydrogen “is the Swiss Army Knife of energy transition, thanks to its versatility across the transport, industry, and power sectors.”

“By establishing a robust regulatory and policy framework, and by securing necessary funding for research, development, and commercialisation, we can fully unlock and leverage hydrogen’s vast potential within Australia’s economy.”

“With the new Commonwealth Prac Payment, students in key fields like teaching, midwifery, and social work now get $319.50 a week during their practical placements. 

“Given our shortage of engineers, the government must extend this support to engineering students too. If we truly want a smarter future, we need to make it easier for aspiring engineers to support themselves and their families as they prepare to drive Australia’s progress.”

Ms Madew said Engineers Australia was also pleased with the budget’s focus on tackling workforce shortages, implementing initiatives from the Universities Accord, boosting STEM skills, and supporting women. 

“It’s clear we urgently need to upskill our workforce to handle the energy transition, enhance our manufacturing, and beef up our digital capabilities,” she said.

“To stay competitive globally, we must embrace a future where continuous learning and quick adaptation are key to Australian engineering.”

“The Federal Budget sets an ambitious and forward-thinking plan that focuses on skills, innovation, sovereign capability, and the global energy transition—a direction supported by Engineers Australia. Engineers will be instrumental in advancing an agenda designed to tackle the financial, workforce, environmental, and global challenges we currently face.”

“Unleashing the engineering workforce right across industry, boosting engineering skills in government, and investing in more engineering research and development are the keys to creating the innovation and value-add that the government is seeking.”

Ms Madew said that the transition to clean energy was one of the most critical issues Australia currently faced.

“While we appreciate the climate-focused initiatives in the budget, we need to significantly boost engineering innovation to fast-track our shift towards a sustainable economy,” she said.

“It’s crucial we develop a detailed, collaborative plan for long-term infrastructure to ensure our economic prosperity. We urge governments at all levels to commit to continuous improvement through best-practice governance, planning, procurement and delivery.

“The Future Made in Australia framework is our first true generational plan to tackle the energy transition head-on. 

“We’re moving from market-led decisions to strategic investments, leveraging our natural advantages to keep competitive and sustainable. This isn’t just about going green; it’s about making it economically viable on a global scale.”

ACCI sees slim pickings for small businesses

THE federal government is treading a narrow path to tackle short-term demands, but the Australian Chamber of Commerce and Industry (ACCI) said the 2024-25 Federal Budget prompted more questions about taming inflation and the medium-term sustainability of spending.

“The projection of a surplus for the current financial year is positive. However, over the next four years, there appears to be little prospect of substantial progress towards further budget repair,” ACCI chief executive officer Andrew McKellar said.

“Over this period additional spending means the budget deficit and net debt will both be higher than previously forecast.

“While the impact of the budget on inflation is hard to assess, it would be difficult to accept the assertion that it materially reduces underlying cost or price pressures.

“Business is not asking for the size of the government to grow. This can only lead to higher costs and more taxes.”

Mr McKellar said the budget delivered “slim pickings for small businesses.”

“While ongoing energy bill relief is welcome, and the extension of instant asset write-off will help some businesses, there are limited measures to address the surging impact of red tape on small business.

“Incentives aimed at encouraging investments from businesses, especially small businesses, are crucial during a time of economic fragility.

“Small business owners are under significant pressure due to increasing regulatory complexity, rising business costs and worker shortages. Small business owners will find very little comfort or reassurance in this budget.”

Mr McKellar said business investment in training and the skills of their employees was a vital pathway to increased productivity. 

“Many small and medium-sized businesses are keen to hire apprentices as a means of increasing their access to skills,” he said.

“The partial extension to support for the apprenticeship system over the next 12 months while a strategic review is completed provides some breathing space. 

“However, it is unclear that this support will be sufficient to arrest the current downward trend in apprenticeship commencements.”

Mr McKellar also said that the ‘Future Made in Australia’ strategy provided “a targeted but modest set of initiatives that focus on advancing the transformation to net zero emissions and other areas of business investment.”

“A net additional investment of $22.7 billion in funding is, in context, not of a magnitude that will fuel further claims of a government picking winners. 

“At the same time, this level of investment raises the question of whether A Future Made in Australia is the game-changer it purports to be.”

By Neil Dowling

AdTorque Edge