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The budget’s small business offering

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People like me — media commentators — can’t help ourselves. We like to find a hook to effectively label matters of public interest, which while complex can be described in a nutshell.

But this isn’t always the domain of the sideshow journos that Lindsey Tanner referred to in his reflective book on life in politics nowadays.

One of the first budgets I covered in the late 1980s was coined “the one that brings home the bacon” and this was imagery created by the then-Treasurer Paul Keating. Peter Costello once invoked the young women of Australia to have one for the country — a baby that is.

So, sometimes we in the media are just innocent pawns in a colourful politician’s game to attract attention. Not so with Wayne Swan this year — I really think he was up against it.

Seinfeld budget

And so this week I christened this as the Seinfeld budget — the budget about nothing!

Let me be clear, there were some good ideas — $2.2 billion for mental health, $1.8 billion for regional hospitals, a $3 billion training package with tougher tests and plans to put 16,000 skilled migrants into the resource regions are all good ideas.

The small business package has some merit, though I don’t think many business owners will be popping champagne or slitting their wrists over the substance of the budget.

Main small biz offerings

In case you missed it, these were the main small business offerings:

  • $5000 up-front tax break for motor vehicle purchases made by companies with less than $2 million in turnover. This starts in 2012-13 and they have toughened up the fringe benefits tax breaks for leasing a business car.
  • A new $34 million program to help Australian suppliers get involved in the Australia’s major resources projects.
  • Increased funding of $60 million for venture capital for renewable energy.
  • A change to the way quarterly income tax payments are made that will reduce payments made by small businesses in 2011-12 by $700 million. The payments will be made up over 2012-13.
  • Another $7.1 million in funding for the small business support phone line.
Super changes

Wisely they took away the penalty tax for putting too much into super and this follows the Assistant Treasurer, Bill Shorten, actually making a mistake himself!

Now you can goof up once and the mistake has to be less than $10,000, which shows that the Government is discriminating against wealthier Australians as Labor tries to win back the old ‘true believers’.

Labor budget

The Treasurer actually told us in his budget speech that this was a Labor budget. That’s why the dependent spouse tax offset is to be abolished for the under-40s. This reduces tax for an income earner on $150,000, with a spouse at home, by $2286. The phase out won’t hit carers but for those under 40, there will be changes.

This is meant to push these spouses back out to work and creating jobs is a big theme of this budget.

There is also a two-year freeze on the $150,000 threshold for family payments. And even kids weren’t spared.

Right now a child can earn $3333 a year tax free because of a $1500 low-income tax offset. The budget says 192,538 kids ‘dodged’ tax in 2008-09 and trusts are often used to do this. The Government thinks it will pocket $240 million or more from this change.

There will also be a reduction in the Medicare rebates for GP services and the rebate for private health insurance is to be reduced.

All part of the plan

There is unbelievable devil in this detail and that’s what happens when a Treasurer faces a $49.4 billion deficit, hopefully shrinking to a $22.6 billion deficit in 2011-12. This will then be replaced by a surplus of $3.5 billion by 2012-13, if everything goes according to plan.

And this “according to plan” issue is important.

Importance of China and the RBA

So, what has to happen to make all of this come about? China has to keep growing at similar rates and this is highly likely. This will help the local mining part of the economy to keep booming.

But what about the other, slower parts of the economy?

Well, that’s in the hands of the Reserve Bank which is hell bent on raising interest rates fearing that the record terms of trade will result in inflation.

If these guys go too far they could easily create near recession conditions in many industries such as retail and manufacturing. Meanwhile the higher interest rates along with booming commodity prices could pump up the Aussie dollar, which would hurt a lot of local businesses.

These are the two tyrants whipping the economy and making Treasurer Wayne Swan’s job so hard that he has created a Seinfeld budget!

As I said to a Brisbane audience on post-budget morning, the Treasurer has two relentless, feeling-less forces making his budget life hard. One is China, which brings inflation and the two-speed economy, and the other is the Reserve Bank.

One is a dictatorship that inflicts its position of economic power on all they deal with and the other is a central bank!

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Published on: Friday, May 13, 2011

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