Federal Budget 2021: Business in driver’s seat of COVID recovery

The West Australian
Treasurer Josh Frydenberg has delivered a solid Budget for businesses.
Treasurer Josh Frydenberg has delivered a solid Budget for businesses. Credit: Gary Ramage Newswire/News Corp Australia

The Morrison Government’s Budget push to put business in the driver’s seat of the pandemic recovery has been backed by WA’s peak industry body but it also warns further investment incentives are needed to diversify the economy.

Chamber of Commerce and Industry WA chief economist Aaron Morey said it was clear the Government had a “strong ambition” to see the private sector take the economic reins, with business investment outside of mining forecast to rise to 12.5 per cent in 2022-23.

Treasurer Josh Frydenberg said in his Budget speech on Tuesday night the Government would implement new business incentives to “unleash a further wave of investment”.

Highlights included extending by a year the temporary measure of full expensing and loss-carry back rules for businesses, generating an additional $20.7 billion in tax relief for employers.

The loss-carry back rules lets firms with turnovers capped at $5 billion to write off losses made as a result of COVID-19 against previous profits. Meanwhile, full expensing allows any business with a total income of less than $5b to deduct the full cost of eligible depreciable assets of any value, provided they were bought from October 6 last year and ready for use by June 30, 2023.

Mr Frydenberg said the Government’s business investment incentives were “filling the order books of the nation”.

“Over 99 per cent of businesses, employing over 11 million workers, can write off the full value of any eligible asset they purchase,” he said.

“This has seen their spending on machinery and equipment increase at the fastest rate in nearly seven years.”

Chamber of Minerals and Energy WA chief executive Paul Everingham said the priority of “recovery over austerity and initiatives” in the Budget would give industry the confidence required to work towards the $140b of projects in the WA pipeline.

The Budget papers outlined that the Government expects non-mining business investment to grow solidly over the forecast period.

But Mr Morey said the Government would need to do “a lot more” beyond full expensing and loss carry-back to ensure investment outside of mining reached 12.5 per cent by 2023.

“If we really want to get investment levels to there, we need to take a fundamental look at the industrial relations system in this country and get proper reform of those areas of policy,” he said.

“We really need both sides of politics to come together to drive reform in those areas.”

Business Council of Australia chief executive Jennifer Westacott vowed to work with Government on ways “to make serious inroads into reversing the freefall in business investment as a share of the economy, which is currently at 28-year lows”.

The Australian Petroleum Production and Exploration Association applauded Budget support for gas-related strategic basins, along with a $540 million investment in four new hydrogen hubs and carbon capture and storage projects.

The Association of Mining and Exploration Companies said the key announcement for the industry was the four-year, $100m extension of the Junior Minerals Exploration Incentive.

“The JMEI is a vital initiative for mineral exploration and its continuation is critical to finding and developing new projects for the industry which directly employs over 260,000 people,” AMEC chief executive Warren Pearce said.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson described the one-year extension of the uncapped instant asset write-off as a “big win for small businesses”.

“It gives small businesses more time and certainty to plan and buy major equipment. It significantly reduces the need for depreciation and cuts red tape,” Mr Billson said.