For a budget that was supposed to spread the pain around, big business appears to have got off exceptionally lightly.
For a budget that was supposed to spread the pain around, business appears to have got off exceptionally lightly.
Headlines leading up to the budget tipped savage cuts of $10 billion a year in corporate welfare — a loss of grants and other programs. Treasurer Joe Hockey’s first budget has delivered nothing of the sort. Business lobbyists will have their work cut out tonight, poring over the budget papers looking for measures to complain about.
OK, big business takes an unspecified hit from the paid parental leave scheme levy – which will be levied at 1.5% of corporate income. But the impact will be softened by a 1.5% cut in company tax, so the bottom line impact for large companies will be zero, and every other business gets a tax cut. A reduction in the research and development tax incentive saves the budget $620 million over the next four years, but is simply in line with the lower corporate tax rate.
The budget impact of the paid parental leave (PPL) scheme, the PPL levy, and company tax cut are masked in the budget papers because they are too uncertain to be counted yet as budget measures. Treasury has made undisclosed provisions.
There is $845 million in cuts to industry assistance schemes over the five years from 2013-14. Gone are the supply chain-focussed Australian Industry Participation and Enterprise Solutions schemes, Commercialisation Australia, the Innovation Investment Fund, Industry Innovation Councils and precincts aimed at fostering industry/research collaboration, Enterprise Connect (which supported small-enterprises) and something called the “Textile, Clothing and Footwear Small Business and Building Innovative Capability” program. Officials in tonight’s budget lock-up weren’t too sure what that one did, although we can guess.
Anyway those cuts are offset by a new $484 million entrepreneurs infrastructure program which will take a new approach to industry policy by using private expertise to commercialise “good ideas” (presumably, compared to the previous government’s bad ones). The net impact of all this is a reduction of $360 million over five years. Bad, but not that bad.
There is $318 million in savings to 2017-18 by cutting the Automotive Transformation Scheme, although it will still cost a billion dollars, and GM will lose $215 million for its next generation vehicles. The car-makers lose out, but we knew that. The ethanol industry will lose production grants worth $122m a year, but that is offset by a reduction in the fuel excise on domestically produced ethanol.
It’s pretty measured. Asked tonight whether corporate Australia was doing its share of the heavy lifting in this budget, Treasurer Hockey said companies were doing “some heavy lifting” – he mentioned the industry assistance — “but at the end of the day it’s corporations that employ people”.
Hockey said one of the challenges he was facing, including as chair of the G20 finance ministers meeting, was that in jurisdictions like the UK company tax rates were falling to 20%. Hockey’s agenda in this budget is obvious: to make Australia as business-friendly as possible.
That’s also evident in what’s not in the budget. For the last six years, the mining industry has feared it will lose the diesel fuel rebate that saves miners roughly $2 billion in fuel excise a year. Although the miners keep winning the policy debate — it’s not a subsidy, they say, because we don’t use the roads the excise was introduced to fund, on the other hand the excise goes largely to consolidated revenue, so it’s a moot point — it is a recurring nightmare that goes down to the wire each time. If miners, farmers and others had to pay the same price for fuel as the rest of us, it would come straight off their bottom line – and have much more impact than the mining tax.
As predicted the government has kept the rebate this time around. What’s more, in reintroducing the indexation of fuel excise – which will lift fuel prices at the bowser for everyone else by CPI or an estimated 0.5c/litre every six months from August 1, according to Treasury officials, raising $2.2 billion over the forward estimates – the government has also indexed the rebate. Nothing to complain about there, either.
Otherwise there’s plenty of largesse, particularly via the $11.6 billion Infrastructure Growth Package which is forecast to catalyse some $58 billion of new infrastructure investment. A new Asset Recycling Fund, which will be managed by the Future Fund and seeded with $5.9 billion from the Education Investment Fund and Building Australia Fund, with fresh contributions from looming sales of Medibank Private and so on, will have industry salivating over an ever-fatter pipeline of privatisation and infrastructure deals.
There is one, one glaring exception to all this of course. The clean energy industry has been routed in this budget, including the axing of the Australian Renewable Energy Agency, saving $1.3 billion over five years from 2017-18 - although a billion dollars of funding remains for existing “priority projects” - and further savings of $125 million over five years by cutting funding for the Clean Technology (Investment and Innovation) program and Cooperative Research Centres. Some $459 million is cut from the Carbon Capture and Storage Flagships Program from 2017-18, though existing projects worth $192 million will be funded; and $17 million will be cut from the Low Emissions Coal Initiative, with $97 million in funding retained.
There is plenty of industry pain here but it is not being spread around, it’s falling squarely on anyone proposing a solution to climate change, unless they’re applying under the Emissions Reduction Fund … but we knew that already.