New Federal Budget set to boost industry
The state of the fiscal deficit has markedly improved since the December update of the mid-year fiscal and economic outlook, giving the government a lot more money to work with in the 2018-19 Budget,” according to Senior Industry Analyst Jason Aravanis.
Industry information research company IBISWorld believes positive economic trends over the last twelve months have given the Federal Government the ability to deliver a favourable budget this year. The 2018-19 budget is expected to ease the cost of living through tax cuts and ramp up infrastructure investment, while remaining on track to return to a budget surplus by 2020-21.
“The economy has outperformed government expectations over the past twelve months, leading to a smaller than expected deficit,” said Mr Aravanis.
“Strong employment growth and rebounding commodity prices have contributed to taxation revenue outperforming previous government estimates. In addition, many firms that racked up large tax losses during the global financial crisis have now exhausted their ability to carry these losses forward, amplifying the rise in taxation revenue as profitability has increased across the economy.
“These factors mean a budget boost for a range of sectors, spanning retail, construction, aged care, motion picture and video production, and also select vegetable and fruit growers.”
According to IBISWorld, the measures set to deliver the biggest boost to industry include:
Tax cuts should spur retail spending
The Federal Government has outlined plans to provide tax relief to Australian households over the next decade. The government is set to formally enshrine an ongoing taxation limit of 23.9% of GDP in the 2018-19 Budget, committing future budgets to lower tax rates in the future.
In the short term, taxation relief will be concentrated on low- and middle-income households. Low-income earners are set to pay less tax, as the low-income tax offset (LITO) is increased in the 2018-19 Budget.
Currently, the LITO is a $445 payment to individuals earning below $37,000 per annum, with this amount decreasing as taxable income rises to the upper threshold of $66,667 per annum. The 2018-19 Budget is anticipated to increase this payment to $1,000, leading to more cash in the pockets of low-income earners.
In addition, the government is set to axe the proposed Medicare levy increase, which will bring further relief to Australian households. The subsequent availability of greater household disposable income is likely to spur on growth in the Consumer Goods Retailing industry.
Infrastructure boost for construction sector
The 2018-19 Budget also includes over $24.5 billion in new infrastructure commitments, which will assist the construction sector.
The Road and Bridge Construction industry is set to receive a significant boost over the next five years, as the Federal Government has confirmed $1.8 billion in funding for the North-East Link in Melbourne, $1.0 billion for M1 Pacific Motorway in Queensland, and $1.4 billion for the North-South corridor in Adelaide.
The Heavy Industry and Other Non-Building Construction industry will benefit from $5.1 billion in funding for the Melbourne Airport rail link, $1.0 billion for the Metronet rail development in Perth, and $400 million for the Port Botany rail line in New South Wales. The Hydro-Electricity Generation industry is also set to expand over the next five years, with $4.5 billion for the Snowy Hydro 2.0 project.
Tax breaks for film producers
The Motion Picture and Video Production industry will benefit from an additional $140 million in funding to promote the production of Hollywood films in Queensland over the next four years. This funding will be used to offer greater tax breaks to lure large-scale movie productions to Australia, effectively doubling the existing tax rebate.
Investment in aged-care funding
The 2018-19 Budget is expected to earmark over $100.0 billion for aged care over the next five years. Greater funding for training, streamlined services and in-home care is aimed to reduce the waiting list for aged care.
Currently, over 100,000 people are waiting for in-home care placements to become available. Extra Federal Government funding is expected to significantly benefit the Aged Care Residential Services industry.
Biosecurity levy for local growers
A new $340 million biosecurity levy on all import containers into Australia will provide some support to the agricultural sector. The levy will be used to fund stronger biosecurity measures for Australia, such as more efficient detection systems at port terminals and airports.
The Australian agricultural sector will benefit from stronger biosecurity in Australia, as domestic producers will be able to sell their natural products free of chemicals that are used to combat pests and diseases in other countries. This allows local producers to earn a premium in international markets.
Industries that stand to benefit include the Outdoor Vegetable Growing industry and the Apple, Pear and Stone Fruit Growing industry.
