Stimulus a short-term buffer for small business

The Australian Chamber of Commerce and Industry commends the Australian Government for its well-targeted and scalable stimulus package, released today in response to the COVID-19 pandemic.

The measures contained in the package align with ACCI’s economic policy priorities.

While the package is focused on providing relief over the next three months in the belief that the impact of CoViD19 will be temporary, it is scalable and allows scope for new measures if the situation intensifies.

ACCI CEO James Pearson says increasing the instant asset write-off by five-fold to $150,000 for businesses with a turnover of up to $500 million would significantly enhance SME’s business capabilities.

“Small businesses across the country will bear the brunt of restrictions on the movement of people and an economic downturn.

“These businesses have endured challenging trading conditions for a long time due to sluggish growth in consumer spending and difficulties in accessing finance, which makes them extremely vulnerable to further deterioration in the economy.

“The changes to the instant asset write-off put more money in a small business owner’s pocket today, representing a discount at the time of purchase of up to 30 per cent on the purchase of plant and equipment by a business in the current year.

“The instant asset write-off could be used for the purchase of a new car or truck for a construction company; new scanning equipment to improve the speed and quality of output on the production line of a manufacturer; or advanced digital equipment to improve the efficiency of forklift movements in a warehouse facility or truck movements for a logistics company.”

Mr Pearson says SME grants up to $25,000 will directly assist vulnerable businesses, jobs and households in a way that is prudent and provides a good foundation for further measures should they be needed.

“The supply and demand shocks resulting from COVID-19 require immediate support for both business cash flows and consumer demand. More than ever, cash flow is king.

“We expect these grants to be delivered through the tax system, so as to minimise paperwork and red-tape for businesses to access the grants. This will make it much quicker and easier for the government to get this money out the door to business.’

ACCI supports the one-off direct payment of $750 to social security recipients, veterans and other income support recipients, because it will have a knock-on effect in the under-pressure retail sector.

“This payment is targeted at those on low disposable incomes that are the most likely to spend any increase in income immediately. It will give them the confidence to spend rather than save their money.”

Mr Pearson says the dedicated $1billion assistance to those regions that have already been hit by the dramatic drop in tourism will be very welcome.

“These regions have already seen falls of 40 per cent or more in their normal revenue, yet most of the nationwide economic impact from COVID-19 is still ahead of us. Without assistance, businesses in these regions will find it impossible to survive and are likely to cut jobs.

“In addition to travel, cancellation of major events, exhibitions and even smaller conferences and meetings will hit tourism and event businesses very hard.

“Businesses such as travel agents are also already feeling the pain and hopefully the cash injections will help, although the extent of their revenue loss will be too great for some.  More may be needed if this crisis continues.”

ACCI strongly commends the funding to support apprenticeships.

“This is a great initiative from Government – it is targeted to preserve the skills Australia will need in the future when we come out of this crisis and need to rebuild quickly.”

“Backdating the subsidy to the beginning of January is also smart – it gives a cash boost to businesses that had already engaged an apprentice.”

ACCI also continues to promote the need for policy flexibility in future responses given the uncertainty surrounding COVID-19 and the implications for the economy.

“The package allows the Government to make a difference now,” Mr Pearson says.

“The Budget due in May provides another opportunity to take appropriate measures and consider broader structural reforms to lay the foundation for strong economic growth post the pandemic.”