The Gillard government’s promise to get the budget back into surplus by 2012-13 was never going to leave Wayne Swan with much room to move, but the Treasurer has managed to throw a few small bones to SMEs and one very big one, in the form of a $3 billion workforce package.

There is very little in this budget in the way of direct help for small businesses struggling in what Swan likes to call the “patchwork” economy, but in the context of a budget that was supposed contain some deep cuts, the measures that have been announced are pretty positive.

The decision to replace the unwieldy and narrow Entrepreneur’s Tax Offset with a $5000 tax write-off for vehicle purchases is smart.

Both the government and SME advisers believe the ETO carried an overly high compliance burden, but the new write-off will be stunningly simple: buy car, get $5000 write-off immediately.

The only problem is that this measure doesn’t come in until the 2012-13 tax year, which means SMEs won’t actually start claiming it until the 2013-14 year — by which time the patchwork economy will hopefully be firmly in the rear view mirror.

The $34 million program to increase the participation by local suppliers in resources projects isn’t a bad idea, and no doubt many small business owners and their advisers will welcome the technical tax change that will reduce quarterly pay-as-you-go payments by $700 million in 2011-12, even if they’ll make up for it in the following year.

There is plenty missing, as always — there is no new money for innovation, nothing for exporters (indeed, Austrade’s funding is slightly reduced in this budget) and certainly no brilliant grant programs to help fast-growing companies and reduce our reliance on digging stuff out of the ground.

But given the circumstances — and the Big Surplus Promise the government believes it simply must meet — these sorts of initiatives were never very likely anyway.

While SMEs might not get much in the way of short-term benefits from this budget, there should be long-term gains from Swan’s centrepiece: the $3 billion package of initiatives to improve skills and workforce participation.

Like almost every entrepreneur in Australia, Swan can see a skills crisis coming. The unemployment rate is heading down to 4.5% in two years’ time, specialist skills are already in short supply and the pipeline of skilled workers needs to be boosted.

It is positive to see the government taking steps towards this, with a $1.7 billion package for vocational education and training, $200 million for apprentices and $143 million for literacy and numeracy programs.

But the really promising initiative is the National Workforce Development Fund, which will get $558 million to pump into industry training. Industry groups and individual businesses will be able to bid for funds, provided they are prepared to co-invest in training of current or prospective workers.

Importantly, funding will be provided on a sliding scale, with small businesses receiving two-thirds of the cost of training from the government, medium-sized employers getting 50% and large employers getting a third.

While the devil may be in the detail (exactly how the bidding process will work, for example, remains something of mystery and a potential source of problems) this initiative should help SMEs develop the skills of their current workers and help reduce skills shortages across the economy.

And given skills remains at the top of the list of many entrepreneurs’ worry list, that’s a pretty good outcome from a budget light on for big highlights.

Peter Fray

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