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Summary
- The latest federal budget aims to boost employment, provide tax reliefs and increase investment.
- An uptick in infrastructure investment could prove to be beneficial for the job scenario, while
- Green light was given to the budget from AACS, NRA and COSBOA; all from the FMCG domain.
- However, the policies received flak for the non-inclusivity of issues like environment protection, waste reduction, recycling infrastructure and JobSeeker rate regulation.
- The manufacturing sector players felt the budget is too modest to make up for the falling employment in the sector.
The federal budget for 2020-21 released by Treasurer Josh Frydenberg is under the spotlight amid its intended pros and cons. Undoubtedly, the federal budget aims to protect the Australian economy from the mayhem caused by the pandemic. With major funding pledged to small businesses, tax reliefs and healthcare, this budget might prove to be friendly for the economy.
The economy has been hit left, right and centre by the pandemic. With job losses on the rise and interest rates at a minimal level, it is evident that the economy is in dire need of strong policy. The federal budget 2020-21 offers aids in areas of unemployment as well as COVID relief. The JobMaker initiative comprises the first phase of a two-stage fiscal recovery plan. The second phase involves restructuring finances to move out of fiscal debt.
MORE ABOUT THE FEDERAL BUDGET: Is Federal Budget 2020-21 pandemic friendly?
The Upside
Small businesses are believed to be some of the primary beneficiaries from this budget. Small households also gained as they were offered huge tax cuts. A generous amount of funding has been offered in order to facilitate employee and apprentice hiring.
Under the fiscal recovery plan, the Government has decided to promote investment in infrastructure. A sum of $1.3 billion has been pledged towards the transport infrastructure sector. This is of immense importance not only because this sector needs assistance but also because it encourages recovery in other sectors as well. These inter-linkages play a huge role in easing the recovery process of major industries.
This focus on infrastructure has been taken positively by the industry as it would help in job creation and therefore improve the economic scenario.
Many big players in the industry like the Australian Association of Convenience Stores (AACS), National Retail Association (NRA) and Council of Small Business Organisations Australia (COSBOA) have reacted positively to these changes. FMCG industry and the hospitality sector are expected to benefit directly from the increase in demand. With more job opportunities and tax relief, more disposable income is left with people, thereby improving the consumer demand and thereby supporting the economic pick-up.
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Where is the Scope for Improvement?
Council of Social Services CEO Aimee McVeigh has described the budget as “disappointing” and their CEO Cassandra Goldie, in support, said, “The Federal Budget has failed to deliver a permanent, adequate JobSeeker rate.”
There are a lot of suggestions being offered as improvements on the existing budget policies. Many players in the industry argue that not much attention has been given to environment, waste reduction and recycling infrastructure.
Another import aspect left out is forgivable loans on rent payments. With unsteady salaries and payment cuts, many property renters are having a hard time making rent payments. The budget states that landowners are to reduce the rent rates and provide moratoriums; however, no direct funding has been offered for the same.
Home care has been an issue of concern under the pandemic. Reportedly 30,000 have died waiting for a package or going into aged care unnecessarily as they could not be left in their homes.
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Does Budget Hold Any Promise for the Manufacturing Sector?
The manufacturing sector has been in need of major investments. In the current federal budget, jobs are promoted in the private sector in order to create a sustainable means of employment generation.
According to ABS data, the manufacturing sector employs 6.8% of the total workforce and over the last 5 years, employment in this sector has decreased by 3.4%.
AiGroup, whose members employ over 750,000 people across Australia, has come forward with the opinion that the impetus given to small businesses would help boost investment, production and jobs. However, AiGroup also claims that in these uncertain times, the economy is sure to get interrupted by the pandemic and relief measures have to be dynamic to adjust to these changes.
The Australian Industry Group also stated that omitting the issue of decreased migration in the budget could prove to be fatal in the long run. As the population seems to be shrinking in Australia, there is an urgent need to provide alternate solutions to migration as international borders are closed.
On the brighter side of things, the manufacturing sector accepted with open arms the $1.3 billion Modern Manufacturing initiative, the Manufacturer’s Modernisation Fund and the $107.2 million Supply Chain Resilience initiative. But given the depleting workforce in the manufacturing sector, more funding could have gone a long way.
Bottomline
It would take time for the positive effects of these initiatives to transfer onto the economy. Ultimately, the industry, on the whole, benefits when more jobs are created, more money flows into the economy and the economy stabilises.
COVID-induced restrictions have had an adverse impact on the economy, and these have led to a trickle-down effect. On the macroeconomic front, trade surplus continues to suffer, interest rates have been at an ultra-low level of 0.25% and property rates have plunged to surprisingly low levels. On a more micro level, businesses are suffering, and consumer spending has plummeted.
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Overall, a majority of the players in the industry seem to appreciate the budget. However, important aspects like environment protection, JobSeeker rate elevation and waste reduction have not been properly addressed and this pulls down the viability of the proposed policies under the budget.
