The 2021-22 Federal Budget on 11 May is an important opportunity to put in place the measures that will boost investment and spending and drive Australia's recovery from the economic impact of COVID-19.
Australia entered its first recession in more than 30 years in June last year, halting more than three decades of continuous growth. Thanks to the swift actions of the Australian Government last year - implementing several short-term incentives such as temporary full expensing and loss carry back measures - Australia bounced back from its first recession in 30 years and was on track for growth by the end of 2020.
However, APPEA believes that this year's Budget can go a step further to lock in sustained growth and job creation. Currently, the Federal Government has made driving unemployment to lower than five percent a key part of its fiscal strategy, a strategy that can be achieved through increased investment and productivity.
Capital-intensive industries can play a key part in achieving this goal under the right conditions. Industries such as construction, mining, oil and gas, agriculture, and infrastructure can take several years to complete once an investment decision is taken. During a time of recovery, the scale of such projects can provide a level of stability that ensures long-term job security. Ensuring job security in this manner with well-paid positions can provide the necessary base to boost household spending in line with the Federal Government's current fiscal focus.
Government should consider additional reforms to support its key fiscal strategy. Simple and effective measures that all business can benefit from such as improving accessibility to instant asset write-offs and the temporary full expensing measure would stimulate investment and productivity.
To attract investment geared towards large-scale capital-intensive projects, shortening the period of time that an asset is depreciated over and ensuring labour costs are fully deductible will significantly improve the investment economics and reduce fiscal burdens at a minimal cost to government revenue.
Put simply, there is an opportunity in this budget and for the next 12 months for government to improve long-term investor confidence. This confidence would be further improved through the government's continued focus on deregulation. For our industry, streamlining of duplicative regulations between the Federal Government and states and territories, as outlined in APPEA's EPBC Act recommendations last week, would also benefit the economy.
APPEA believes that this year's Budget offers strong opportunities for reforms that can support said capital-intensive industries and, by extension, Australia itself during an unprecedented time. APPEA - in unison with several other associations representing a variety of industries - have recommended that the government implement the following reform options:
- Expand the availability of the temporary full expensing and loss carry back measures and make these measures a permanent fixture of the taxation law to avoid lost opportunities for jobs and investment
- Lower the access threshold for the instant asset write-off
- Ensure salary and wages costs are immediately tax deductible for capital-intensive industries
- Remove barriers to business project restructuring by reforming the rules around transactions involving swaps of assets, permits and existing infrastructure in Australia, making them tax neutral
- Continue to focus on removing, or at least reducing, distortions and barriers that impose unnecessary regulatory and tax burdens on business activity
- Continue to commit to long-term funding and support of skill retraining and development to create a more mobile and flexible work force to maximise active participation in the economy.
By implementing these measures, the 2021-22 Budget can provide the means for increased investment and productivity, providing additional security for key capital-intensive industries, boosting job security and strengthening the Australian economy.
