April 28, 2021
APPEA Pre-Budget Webinar highlights cross-industry support for new investment opportunities
APPEA’s latest APPEA Reconnect webinar, Budget 2021-22 and Beyond, took place yesterday, capturing a diverse array of views on the potential investment, productivity, and job opportunities afforded by the upcoming 2021-22 Federal Budget.
Last year’s Federal Budget introduced measures to help stimulate the economy to account for the then-emerging COVID-19 pandemic, which led to Australia’s first recession in 30 years. Thanks to the quick efforts of government to implement short-term measures such as temporary full expensing and loss carry back, the country managed to recover from the recession swiftly.
Now, the discussion turns to the longer-term opportunities afforded by this year’s Budget, and the ways in which it can enable continued growth and job creation that are the hallmarks of stabilising Australia’s key industries.
APPEA Chief Executive Andrew McConville joined Corporate Tax Association Assistant Director Paul Suppree; Australian Food and Grocery Council CEO Tanya Barden OAM; Australian Constructors Association CEO Jon Davies; ACCI Chief Economist Ross Lambie; and AmCham Australia CEO April Palmerlee in the hour-long event, which was facilitated by noted business commentator Ticky Fullerton.
In his opening address Mr McConville stated that the biggest contrast between last year’s budget and this year’s budget was that last year was all about short-term measures aimed at producing an immediate impact.
“Temporary expensing, loss carry back, those sorts of things; they provided a real shot in the arm to the economy,” said Mr McConville. “With the country rebounding quickly out of the recession – and if you look at the economic growth numbers in the last quarter those measures had the desired impact – the challenge for the government and the economy is what happens next.”
Mr McConville also explained that while the pandemic had resulted in a significant short-term drop in demand for oil and gas, production had been maintained, providing energy to households and businesses throughout 2020. He noted one of the key means to driving longer-term investment to stimulate continued recovery is through stable, well-paid jobs that are typical of industries such as oil and gas.
“That’s really the opportunity for the government going forward – it’s a budget that needs a longer-term focus, getting people into jobs and helping them stay in jobs,” Mr McConville said.
“That can really only occur through long-term investment. The reality is that the sort of investments we saw last year were quite short-term and targeted very much at the consumer. But that is only going to give you a short-term sugar hit, versus the longer-term reform and investment protein that we need to drive the economy.”
Mr McConville also stated that upfront deduction of wage and salary costs from long-term industry projects was “very important”. He also encouraged the government to explore additional allowances – such as extending full expensing measures beyond the existing limit of $5 billion – as a process that could generate confidence in large-scale investments for Australia.
AmCham Australia CEO April Palmerlee opened by expounding on the “100 years of mateship” between Australia and the United States, which overtook the United Kingdom as the country’s biggest overseas investor more than a decade ago. With around 350,000 people employed by American companies in Australia, many of whom are positioned with high salaries of $115,000 per annum or greater, the United States offers a significant source of capital for the small domestic Australian market.
Ms Palmerlee explained that while AmCham recognised the need for a competitive corporate tax rate and clean, affordable, reliable energy sources, these were large and expensive issues to deal with.
“What we wanted to do was give the government our input on smaller, quicker, tactical moves that wouldn’t cost a lot, would be easy to implement and would have a significant impact on investment,” Ms Palmerlee said.
These measures included a national review of the regulators to align their cultures with the government’s deregulatory agenda and to encourage investment for investors; implementing targeted micro-reform initiatives; and reforming the fringe benefits tax (FBT) to “reboot” economic opportunity for CBDs.
“We focused on the things that we thought were doable right now – we talked about streamlining existing regulation, impacting business and investment as a nation-building reform agenda to facilitate economic growth,” Ms Palmerlee explained.
Dr Lambie meanwhile explained that robustness of recovery depended on good health outcomes and lifting productivity in a world likely to be very different after COVID-19.
“The opportunity for a business-led recovery means the government must focus on investment settings,” he explained.
“Reform is not an option. Long-term growth depends on consumers willing to spend and businesses willing to invest. ACCI is calling on the Federal and State governments to implement supply-side productivity reforms to stimulate business investment.”
Ms Barden was the next attendee to speak, explaining that COVID-19 exposed the need for a local manufacturing presence in Australia, despite the associated high costs and supply chain disruptions that came with it. She welcomed the introduction of instant asset write-offs, particularly in the food and beverage industry, where input and output costs can diverge quite dramatically when compared with other manufacturing sectors. She also expressed a desire for the government to increase its R&D budget to enable the uptake of smart manufacturing methods.
“We do need sustained recovery and I think it’s worth governments continuing to spend on measures like that; in our case, it’s about boosting smart manufacturing and stimulating that investment,” Ms Barden said.
“The government has indicated that it is keen for Australia to be a digital tech- and skills-focused economy up to 2030. We really need to see a lot more focus around how we build those digital skills in the Australian economy to be able to couple with that smart manufacturing.”
Mr Suppree spoke next, suggesting that the government should not waste the lessons of the crisis, which offered a chance for broader reviews of the corporate tax system. This included, he explained, the potential for a greater shift to consumption-based taxes as opposed to income taxes at both the personal and corporate level. He also cited Australia’s high corporate tax rate (30%) but stopped short of suggesting reforms to lower the rate to stimulate investment.
“The US experience with the reduction of corporate tax under the Trump administration seemed to fund share buybacks rather than investment, so the jury is out as to whether [it is] necessarily a solution in the short term,” he said.
Mr Suppree also echoed Mr McConville’s view that timing changes positively impacting companies’ abilities to receive deductions at an earlier stage such as full expensing measures and loss carry backs were positive moves that should be extended by government to become permanent tax fixtures. This could help to reduce interest debts on projects at a “minimal cost to government coffers”.
Finally, Mr Davies discussed the pressing need for the Australian Government to continue spending on construction infrastructure projects, with an increased emphasis on centralisation of funding and best-practice procurement and delivery processes.
“Every dollar spent on infrastructure has a three-dollar kick on to the wider economy, but what we really want the government to focus on is to start getting involved with how that money is spent,” Mr Davies explained.
He also discussed the construction industry’s productivity gap of 25% when compared with other industries, and how halving that gap could provide an additional $15 billion of infrastructure a year for the same level of investment.
“I bet Josh [the Treasurer, the Hon Josh Frydenberg MP] would love to get his hands on $15 billion right now,” Mr Davies said. “That money could be spent on anything; more teachers, more services, more nurses.
“It’s a huge opportunity that we have and all that requires for it to happen is for government to pay more interest in the nation’s third-largest industry, an industry that employs one in 10 of the working population and contributes 8% of GDP.”
Overall, the latest webinar was a successful melding of minds from all across Australian industry, and there was a broad sense of agreement among participants for the potential of investment reformation in the changed landscape of a post-COVID 19 world.