The instability and compromise brought by a minority Government does not create the certainty business and consumers need to ensure they have confidence to invest or spend, as witnessed after 2010. This, as in the last election, remains the biggest single risk to the Australian economy and the retail sector as the economic ‘canary in a coal mine’.
Given the economic headwinds we have been facing for some time, the ARA recommends retailers vote for the political party they believe will provide clear economic leadership for the next three years.
As we enter the polling booths on Saturday, I encourage retailers to think about who will do the best job freeing up the economy and getting retailers and the business sector on track.
As a measure of how the major political parties sit and the demands under a minority government, the ARA has outlined a number of economic positions for the retail sector to assess who has the strongest economic plan for the country. No political party is promising a short term return to budget surplus.
The Coalition economic plan remains based on the Federal Budget announced in May
The plan is built around Tax and Superannuation Reform which supports tax cuts, commencing with small business and increasing to larger companies over the forward estimates along with personal tax threshold changes.
- A Coalition Government will reduce the company tax rate for businesses with a turnover of less than $10 million in a year to 27.5 per cent, beginning on 1 July 2016
- The Government will commit to reduce the company tax rate for all companies to 25 per cent by 2026-27 which drives investment, jobs and increased revenue
- This will be done by gradually increasing the threshold at which the 27.5 per cent rate begins, from $10 million in 2016-17 to $1 billion in 2021-22. In 2023-24 the tax rate for all companies will be reduced to 27.5 per cent, decreasing yearly by 0.5 per cent until 2026-27; and
- Provides an unincorporated small business discount to be available to businesses with an annual turnover of less than $5 million, an increase in the threshold from $2 million. The rate of the unincorporated small business discount will be increased to 8 per cent, and gradually increased over the next 10 years to 16 per cent
- As part of the Superannuation Tax Reform Package, the Turnbull Government has announced a $1.6 million superannuation transfer balance cap for individuals transferring into retirement phase accounts; the lowering of superannuation concessional contributions cap to $25,000 in a single year; and a low income superannuation tax offset for those earning a taxable income of less than $37,000 per year. People in this income bracket will receive an effective refund of their tax paid on their concessional contributions of up to $500
- A Coalition Government has made changes to the tax levels for individuals and businesses as part of its 10 Year Enterprise Tax Plan: In personal income tax, the 32.5 per cent marginal rate tax threshold will be increased from $80,000 to $87,000, effecting approximately 500,000 Australians.
The Coalition announced a Youth Jobs PaTH which will involve three stages as skills support:
- Employability skills training will begin on 1 April 2017 to help prepare young job seekers for the workplace. The training will help young people better understand what employers expect of them and give them the skills, attitudes and behaviours required to be successful in a job
- From 1 April 2017, up to 30,000 young job seekers each year will be eligible to undertake an internship placement of 4 to 12 weeks. The internships will be voluntary and provide incentives of $1,000 upfront to a business to host an intern and a $200 fortnightly payment to job seekers on top of their income support
- From 1 January 2017 a Youth Bonus wage subsidy of between $6,500 and $10,000 will be available to businesses who take on an eligible young person as an employee or apprentice.
Employment law remains a major issue for the retail sector, with the Coalition making a commitment to support the independent arbitrator as being the body to assess issues such as penalty rates.
Part way through the campaign Federal Labor announced a 10 year economic plan
The announcement indicated a Federal Labor Government will support the transition of the Australian economy and identify opportunities to make investments that will drive innovation and local jobs in advanced manufacturing, renewable energy and services.
The economic plan indicates a Federal Labor Government will build a strong education system by investing in schools, TAFE, and universities.
The plan also outlines that a Federal Labor Government will invest in infrastructure such as roads, rail, and a first rate National Broadband Network.
The plan highlights the uncertainty which surrounds a changing labour market – with the decline of the mining investment boom, climate change and the impact of technology.
The economic plan released by Labor outlines six key areas which address the challenges of the changing market and seek to drive productivity by:
- Investing in people – A Federal Labor Government will improve the quality of education and training, to ensure Australians are prepared for jobs of the future that meet market demands
- Building Australia – A Federal Labor Government will invest in roads, rail and the NBN in order to create jobs and improve the liveability of Australia’s cities and regions
- Driving investment in renewables and new industry – A Federal Labor Government will focus on creating jobs in manufacturing and attracting investment in renewables
- Supporting innovation and start-ups – A Federal Labor Government will provide tax relief and support for start-ups in order to create jobs and drive innovation
- Helping small business – A Federal Labor Government will deliver tax cuts to small businesses and provide support when competing in the marketplace
- Budget repair that’s fair – A Federal Labor Government will support middle and working class families by providing targeted tax concessions. A Federal Labor Government will also encourage greater female participation in the workforce.
Labor has also announced a number of additional economic measures during the campaign including:
- A Labor Government will provide small businesses with a tax break of up to $20,000 if they hire a parent returning to work, a carer or Australian under 25 or over 55. The tax break would offset the wages of up to five new employees
- Businesses that have been in existence for two or more years and with a turnover of less than $2 million will be able to claim a 40 per cent deduction on top of the amount they can currently claim for their employees. This will decrease the small business company tax rate to 27.5 per cent
- A Labor Government will set the capital gains discount on all asset sales from 1 July 2017. This means that assets held for longer than 12 months will attract a 25 per cent capital gains discount, lowered from the current 50 per cent. This proposed policy will not affect investments made by superannuation funds. Further, the capital gains tax discount will not change for small business assets
- A Labor Government will limit negative gearing from 1 July 2017 to only new houses. Labor’s fiscal plan indicates that changes to negative gearing and capital gains will deliver $7 billion in savings by 2026.
As part of Labor’s jobs and skills program, job seekers will take part in:
- A six week work readiness course focusing on essential employment skills as well as personal presentation, interview techniques and job hunting
- A six month work placement with an employer, paid at an award equivalent training wage
- A fully funded Certificate III in a subject of their choice.
Labor publicly opposed any change to penalty rates and has said it would submit that position to the independent arbitrator, they have also said they would not seek to overturn a decision by the independent arbitrator.
In the event of a minority Parliament there are multiple demands on Government
Whoever deals with various independents and minor parties will need to take on many of their policy positions. As an example two of the most likely king making groups have outlined the below positions.
The Greens, the seat of Melbourne is currently held by Greens MP Adam Bandt who has held the seat since 2010. The Greens may also win the seat of Batman, currently held by the ALP’s David Feeney, with the chance some Sydney CBD seats could also be in play. The Greens policies include:
- Enforcing a 90 percent clean energy target by 2030 and installing a ban on new coal mines and fracking projects
- Investing $1.2 billion in the Great Barrier Reef Repair Loan Facility and introduce a cap on water quality pollution
- Fund a $5 million campaign to promote the Clean Energy Finance Corporation
- Increasing the number of Family Reunion visas for migrants to 10,000 per year
- A 20 percent tax levied on sugary drinks
- Developing a needs-based school funding system and maintaining the National Education Reform Agreement through COAG
- Minimising production of nuclear energy and exports to stall the generation of nuclear waste
- Increasing welfare provisions through Newstart, Youth Allowance, and Rent Assistance; and
- Supplying families with 24 hours of Early Childhood Care a week.
Nick Xenophon Team (NXT), the South Australian Senator Nick Xenophon’s NXT party, may also gain seats in the House of Representatives. Possible seats include Grey (contested by Andrea Broadfoot), Mayo (contested by Rebekha Sharkie), Hindmarsh (contested by Daniel Kirk), Adelaide (contested by Joe Hill), and Wakefield (contested by Richard Inwood). NXT’s policy priorities are:
- Advocating preferential engagement with Australian suppliers for Commonwealth Government contracts, introducing stricter labelling laws for Australian-made products and tightening anti-dumping laws for imports
- Looking at regulation of retail gift card schemes
- Introducing for greater legal protections for whistle blowers and conducting a Royal Commission to the Financial Services Sector
- Supporting the raising of the Small Business Threshold from $2 million to $10 million and introducing targeted tax breaks for small business in the first two years of operation
- Introducing a best-practice Emissions Trading Scheme
- Lowering the current Foreign Investment Review Board investment threshold to increase vetting of foreign investments and introducing stricter investment laws
- Expanding the scope of gambling laws to restrict predatory gambling and gambling advertising.
With the ARA’s role to support the prosperity of the retail sector, we have been encouraged that some of the ‘10 in 10’ we have co-developed with the Australian Chamber of Commerce and Industry have been taken on board by both major Political groupings.
There are no decisions more important than those we make about our future government. I would encourage all retailers to consider the best outcome for their economic prosperity which in turn will drive the social outcomes we all desire.
ARA Executive Director