Many see the 2016 federal budget as a reach for stability from a government standing on shaky ground.
A common theme seems to be that things won’t get dramatically better anytime soon, but they also won’t get worse. GDP growth from now until 2019 is projected to hover at 3 per cent year-on-year, but this is a downgrade from the 3.5 per cent outlined in the 2015 budget.
All’s not lost, though. This past year was a good year for employment levels. According to government resources, nearly 300,000 jobs were created, largely in service industries and infrastructure, while manufacturing continued to decline. This fits well with the Turnbull government’s focus on innovation, STEM skills, and trade and competition as drivers of economic progress.
In line with 2015, the 2016 federal budget emphasised employment as key to economic growth. To achieve this, the government is channelling resources into small businesses, training initiatives and infrastructure. However, some sectors will take a hit as tax brackets change and funding is slashed.
Here are five things from the 2016 federal budget that HR needs to think about:
1. Small businesses set to benefit
Once again, things are looking up for small businesses. Several incentives for businesses earning less than $2 million a year were announced, including a tax cut to bring rates down to 27.5 per cent starting in July. To complement this, the eligibility threshold will rise from $2 million in turnover to $10 million. The changes are expected to benefit more than 870,000 businesses, representing 3.4 million workers, in the hope that the nation’s startups and SMEs start hustling.
However, it’s not all sunshine. Large multinational corporations are coming under increased scrutiny this year. Companies that earn $1 billion or more a year should brace for a tax hike to 40 per cent. Penalties for businesses that don’t comply are set to increase as well, and whistleblowers who bring any tax avoidance practices to light will receive increased protection under the law, starting in 2018. With this in mind, HR needs to stay up-to-date on any and all changes and adjust policies accordingly.
2. Focus on youth employment and training
If the aim of the 2016 federal budget is to jumpstart economic growth, then Australia’s youth are getting a jolt. Starting in 2017, a new initiative called the Youth Jobs PaTH (Prepare, Trial, Hire) program will provide $752 million to train youth under 25 to enter the workforce. Part of this includes an internship program with placements for 30,000 people each year. Companies that participate will be eligible for a payment of $1000, and those who offer long-term employment opportunities could see $6500 to $10,000 in wage subsidies.
All of this is part of a larger, $840.3 million package to spur youth employment. From 1 April 2017, young job seekers can participate in a six-week intensive training program aimed at developing their hireability, basic employment skills and job-readiness. For HR professionals concerned with workforce and succession planning, this could be a beneficial way to get fresh faces into the organisation.
3. Public sector takes a hit
Well, it’s less of a hit and more of a graze. The efficiency dividend, an annual funding reduction for government agencies, is meant to offset increases in productivity. However, the 2016 federal budget increases the dividend for 2017-18 from 1.25 per cent to 1.5 per cent. While some of these savings are intended for reinvestment in the public sector to bring it into the 21st century, the efficiency dividend is compounded by ongoing efforts to trim waste from several departments. It’s unclear whether there will be job cuts as a result, but the private and public sectors should nevertheless anticipate a surplus of workers in some areas and shortages in others.
4. Working parents missing out
Employees with young children shouldn’t expect a reprieve anytime soon. Childcare subsidies, which were a major sweetener in the 2015 budget, are being deferred until next year. The justification is that it will save $1.1 billion, but that’s cold comfort for working parents, especially after family tax benefit reforms were rejected by the senate earlier. As a result, businesses might have to pick up the slack and find ways to support employees with children or those looking to return to work from parental leave.
5. Infrastructure and defence get gains
Your morning commute might get a little less arduous thanks to $3 billion in new infrastructure projects, much of it focused on roads. Victoria and Queensland will see the biggest boost in public works, while longer-term projects are in the pipeline. This budget also focuses on urban development, which highlights the transition from a resource-focused economy to one dependent on knowledge and service industries. Funds will be provided to upgrade public transport in Melbourne and Sydney, along with rail lines between Melbourne and Brisbane.
The recent announcement of naval contracts for submarine and patrol boat construction in Western Australia and South Australia is only the tip of the iceberg. The government plans to increase the defence budget by 2 per cent of GDP by 2020, which is three years earlier than originally planned. About $1.5 billion is targeted at innovation within defence, creating opportunities for technology companies.
BONUS: A little mystery
Buried in the 2016 federal budget is a ‘sealed section’, or about $1.6 billion in funds that are “not yet announced.” However, attached to this is savings of $2 billion. The measures behind these mystery numbers will be announced soon, so watch this space.