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Business advocates' mixed response to $12 billion budget shortfall announcement

4:54AM | Tuesday, 30 April

Small business advocates have delivered a mixed response to Prime Minister Julia Gillard’s announcement yesterday of a $12 billion budget shortfall, saying now is a good time to introduce some much-needed tax changes.   However, some advocates and economists have warned the announcement may have a detrimental impact, with Gillard warning that new taxes may be imposed in order to pay for new spending on disability insurance and education.   Finance Minister Penny Wong told the ABC this morning the government is considering a wide range of options, and did not deny the possibility of a levy to fund the National Disability Insurance Scheme.   While economists say the deficit is not an economic problem, as Australia’s credit rating is secure, the impact on confidence could impact businesses.   “The impact here is more on confidence and uncertainty,” CommSec economist Savanth Sebastian told SmartCompany this morning.   “Until we get confirmation about what measures are put in play, that will be a concern. We’ve seen some improvement in confidence, and further cuts to tax concessions could have a detrimental impact.”   Gillard said yesterday the budget will be affected by a drastic fall in revenue of about $12 billion. The Australian Financial Review has reported this will translate into a deficit of between $16 billion and $17 billion.   Gillard also said yesterday the shortfall would mean putting “every reasonable option on the table” in order to plug the gap, “even options previously off the table”.   The Prime Minister said the government would spend “less in some areas than we had hoped, to raise more in revenue in some areas than we had planned”.   While the government has not targeted any specific areas, previous speculation had pinpointed self-managed superannuation and high-income earners as potential sources of revenue.   Peter Strong, the chief executive of the Council of Small Businesses of Australia, told SmartCompany this morning the government should consider financing SMEs in order to boost medium-term growth.   “We need to have better targeted funds for businesses that are identified as growing quickly,” he says, also adding the government should consider taxing purchases made overseas in order to raise GST revenue.   However, Strong says the size of the deficit isn’t necessarily an issue for small businesses, per se.   “At the micro-level, we look for solutions. What this suggests to me is that we need to get our micro-economics right.”   Savanth Sebastian agrees the size of the deficit isn’t necessarily a large problem, especially as it has shrunk since last year, but points out the impact on confidence such a big budget gap could have.   “We’ve seen some improvement in confidence, and that translates to business confidence,” he says.   “Further cuts to tax concessions and revenue can have a detrimental impact on that early boost to confidence.”   Sebastian also says the deficit means the Reserve Bank is in a position to ease interest rates even further.   However, not every business group is so pleased. The Australian Chamber of Commerce and Industry released a harsh response to yesterday’s announcement.   Head of economics and workplace relations Greg Evans said the latest writedown “puts the onus on the government to properly deal with spending”.   “Business is indicating that a major cause of uncertainty is the inability for the government to get its fiscal house in order and to set out a pathway back to surplus.”   “This has become our number one economic priority as without a sustainable budget there is no scope for the major economic reforms required such as delivering a tax system that promotes incentive and enables productivity improvements.”   This story first appeared on SmartCompany.

Start-ups could be hit by Coalition tax hike as budget hole blows out to $12 billion

4:09AM | Tuesday, 30 April

The small business community could be hit by the Coalition's proposal to tax the largest 3200 companies in order to fund its maternity leave scheme, with tax experts warning smaller companies are in danger of being affected.   The warning comes as Prime Minister Julia Gillard's budget troubles have continued, as she is set to announce today the government will record a shortfall of $12 billion in next month's budget – a figure worse than expected.   Economists and business groups have said they are concerned about the announcement, and what long-term effects it could have on the nation's finances.   The Coalition has made the maternity leave scheme a pillar of its election campaign. The 3200 largest companies will be taxed an extra 1.5% in order to fund the plan, which will pay primary carers a full six months' salary.   Coalition leader Tony Abbott has said the program will come alongside a reduction in the corporate tax rate for other businesses, although reports indicate this proposal is in jeopardy.   The Tax Institute tax counsel Deepti Paton told SmartCompany this morning the category of largest 3200 companies squarely hits a number of SMEs.   Paton points to the ATO's own statistics. The ATO categorises the number of "very large" companies existing in Australia at 927. These companies have income more than $250 million.   However, there are only 1099 companies in the next biggest category, "large" businesses, which have income between $100 million and $250 million.   This means, in order to fulfil the 3200 companies target slated by the Coalition, it needs to tax businesses in the "medium" category, of which there are 12,916 businesses. These have income between $10 million and $100 million.   Paton told SmartCompany while the organisation has "always been very supportive of a tax rate cut when it can be afforded", the impact of taxing smaller organisations cannot be denied.   "The notion of affordability has to be counter-balanced," she says. "We'd like to see a cohesive plan that maximises productivity for Australian businesses and SMEs."   Paton also points out the ATO also can define an SME as a business earning anything up to $250 million.   Meanwhile the government is set to announce the current budget shortfall is even worse than feared.   Prime Minister Julia Gillard is set to announce today the May budget will produce a shortfall of $12 billion – but no new spending programs such as education and disability reforms will be targeted for spending cuts.   The deficit of the 2012-13 year is now expected to be at least $11 billion.   The Department of Prime Minister and Cabinet was contacted this morning regarding the announcement, but no reply was received prior to publication.   The Australian Financial Review has reported Gillard will announce the deficit today. It comes as two new reports from the Grattan Institute and Macroeconomics have found the government is facing long-term deficits as a result of both weak revenue trends and new spending initiatives.   Gillard will reportedly say today the budget must "respond to the huge reductions in revenue growth over the next four years", but it also needs to "make necessary investments in the nation's future to ensure that none of our people are left behind".   The major problem is not spending, Gillard is expected to say, but falling revenue rates.   Australian Chamber of Commerce and Industry head of economics, Greg Evans, told SmartCompany this morning the announcement "puts the onus on the government to properly deal with spending in the next federal budget".   "Without a sustainable budget there is no scope for the major economic reforms required such as delivering a tax system that promotes incentive and enbales productivity improvements."   AMP economist Shane Oliver says while the shortfall isn't a significant problem in the sense we already knew the budget wouldn't deliver a surplus, it does underline a "broader issue".   "Where it's probably a longer-term problem is the fact it's underlined Australia has a revenue problem."   "We're not in dire straits...but instead of years of surpluses we may expect several years of deficits."   This story first appeared on SmartCompany.

Christmas fizzer for small businesses following December sales slump

3:21AM | Monday, 11 March

Economy-wide spending fell almost 2% in December, according to the latest Commonwealth Bank Business Sales Indicator, despite small businesses’ hopes for a buoyant Christmas shopping season.

RBA cuts cash rate to 3% as consumer spending stalls

3:00AM | Monday, 11 March

The Reserve Bank has cut the cash rate by 25 basis points to 3%, admitting that while consumer spending is expected to grow, a return to “very strong growth” seen in previous years is unlikely.

Consumer spending up 3.9% but another rate cut looks unlikely

3:28AM | Tuesday, 12 March

Economy-wide spending rose by 3.9% in September, according to the Commonwealth Bank Business Sales Indicator, but a spike in inflation has reduced the likelihood of another rate cut.

Business sales slide in July as consumers rein in their spending

8:47AM | Wednesday, 22 August

The Commonwealth Bank Business Sales Indicator fell 5.4% in seasonally adjusted terms in July, while another survey shows the small business sector has become increasingly pessimistic about the economy.

Australian economy could miss out on $90 billion if productivity not addressed, report warns

8:41AM | Thursday, 16 August

The Australian economy could gain as much as $90 billion in the next five years – but only if the Federal Government implements enough ways to boost productivity in the years after the mining boom ends, a report from research group McKinsey & Co argues.

THE NEWS WRAP: Surprise dip in online activity for SMEs

8:20PM | Monday, 13 August

The amount of online activity conducted by small businesses took a surprising fall last month, despite steady growth in the number of SME websites, according to new research.

THE NEWS WRAP: Business keen on more rate cuts as RBA holds

7:22PM | Tuesday, 3 July

Business groups have raised hopes that the Reserve Bank will cut interest rates in the coming months, after yesterday’s decision to freeze the official cash rate at 3.5%.

Clean tech start-ups peer through carbon tax gloom

7:41AM | Monday, 2 July

Clean energy start-ups are gearing up for the potential opportunities provided by the newly-imposed carbon tax, despite widespread uncertainty in the business community over the rising costs associated with the scheme.

The carbon tax: What your business must know

6:44AM | Friday, 29 June

The carbon tax has been a contentious issue in the Australian business community since the Federal Government announced shortly after the last election that it will come into effect on July 1 this year.

Insolvencies hit record level as business expectations flounder

4:35AM | Monday, 30 April

Small business insolvencies have reached an unwelcome new high, with business expectations continuing to remain below average, according to new figures.

Interest rates unchanged despite calls for cut

4:51AM | Tuesday, 3 April

The Reserve Bank has kept the official interest rate unchanged at 4.25%, despite calls for it to be cut, saying the decision was appropriate in light of growth, inflation and lending rates.

SMEs suffering from plummeting business confidence: ACCI report

2:38AM | Tuesday, 21 February

The small business sector is continuing to lose confidence in the economy, according to the Australian Chamber of Commerce and Industry, as it calls for changes to unfair dismissal laws.

Industry groups cast doubt on Labor’s surplus pledge

11:04AM | Tuesday, 29 November

Industry groups have thrown their support behind the Federal Government’s renewed promise to return the budget to surplus, but have raised doubts over the measures it will use to achieve this.

Business groups wait for confirmation of $23-a-tonne carbon price

7:35AM | Thursday, 7 July

Business groups are eagerly awaiting full details of the carbon tax to be released on Sunday, with reports suggesting the scheme will kick off at $23 per tonne.

Rates remain on hold as business conditions hit 13-year low

7:32PM | Tuesday, 5 July

Interest rates have remained on hold for yet another month, the Reserve Bank announced yesterday, but the lengthy hold-off appears to be contributing to the pressures faced by business.

New employment figures highlight boom in health care

6:58AM | Friday, 17 June

Health and social assistance has overtaken retail as Australia’s biggest employment sector, according to new data, suggesting start-ups should investigate business opportunities within this industry.

Aussie dollar and rising costs continue to cripple manufacturers

6:45AM | Thursday, 16 June

The strength of the Australian dollar and rising production costs continue to hurt Australian manufacturers, according to a report by Westpac and the Australian Chamber of Commerce and Industry.

THE NEWS WRAP: Tony Abbott backs away from supporting plain cigarette packaging

5:42PM | Tuesday, 17 May

Federal opposition leader Tony Abbott has backed away from supporting plain cigarette packaging, saying that that the Government’s proposals could prove “counterproductive.”

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