Over the decades, we have heard the one-liners such as ‘this is the recession we had to have’. When the Australian Government handed down its Federal Budget on Tuesday, 6 October 2020, it was a case of ‘this is the deficit we had to have’, writes Wayne Debernardi, general manager public affairs, Institute of Public Accountants (IPA).
Let’s put that into context, shall we? The past 12 months has been horrific for Australia. Months of ravaging bushfires, extensive floods and a global pandemic has almost buckled the economy to its knees. If we were to now get a plague of locusts, it could make a fine script for Tim Burton’s next horror movie. All he would have to do is resurrect William Pratt, aka Boris Karloff, to lurk in the shadows of Parliament House to make a sell-out.
COVID-19 has left its mark and continues to do so. Just look at Victoria which is still striving to get out of locked-down mode to reunite with the rest of the Australian civilization. We are, however, still the lucky country. We have had under 1,000 deaths due to the virus compared with the United States with over 210,000 and, more than one million globally.
But of course, it’s a numbers game and so are budgets. Australia’s economic outlook has not been this grim since the Great Depression. Even the tide of the GFC which Australia swam through can now be seen as a blimp on the charts by comparison.
The stimulus packages introduced since March 2020 have all but run their course. Millions of Australians are out of work, thousands of businesses are closed; many of them for good.
Governments can raise revenue by increasing taxes but to what point when the country is already bleeding dry. Twelve months ago, Australia was looking forward to black ink on the fiscal bottom line. Now, we have a Federal Budget that will plummet the country’s deficit to a depth never ventured.
However, what choice did the Government have? As my father always told me, ‘you have to spend it to make it’, and Australia needed a huge cash injection and that is what the 2020 budget has delivered. Tax cuts and infrastructure investment to incentivise job growth and consumer spending which will hopefully see many of our flagging small businesses regain territory lost during the pandemic and have cash registers chiming again.
In addition, the recently introduced insolvency reforms for Australian small businesses will test their viability and support their recovery, restructure and survival or alternatively, help them wind down and exit without the personal devastation that is often attached to the process.
A key element of the reforms includes a new debt restructuring process following key features of the US Chapter 11 bankruptcy process. This allows eligible small businesses to restructure their debt and improve their chance for survival. Importantly, while accessing a single, streamlined process, the small business owner remains in control of their business. This empowerment will help rebuild small business confidence.
Yes, our small businesses have been battered over the last 12 months and so has the mental health of many small business owners and their families. For this reason, I was pleased to see that the Budget afforded attention to this area with $5.7 billion announced to prioritise mental health and suicide prevention. This is further supported with Medicare-funded mental health consultations increasing from 10 to 20 and to be extended to all Australians.
This year’s Federal Budget hinges on a few assumptions as all budgets do. The 2019-20 Federal Budget released in April last year was to deliver a $7.1 billion surplus. There were assumptions then too but who could foresee what this past 12 months has presented.
One key assumption built into the 2020-21 Budget as announced by Treasurer, Josh Frydenberg, was one of securing a successful and effective COVID-19 vaccine.
Many of us Aussies like to have a punt and we are generally eternally optimistic and although I remain apolitical and a typical swinging voter, this year I am backing the Frydenberg (leap of) Faith and praying for all Australians it doesn’t turn into the Frydenberg Flop.