Asia and Pacific

The 2015 Australian Budget, Economic Highlights:

Thursday May 21, 2015 Hugh Dixon

The Australian Government presented their 2015 Budget on the 12th May 2015. The budget covered the Australian Government funding for the 2015/16 financial year. The Australian Government is forecast to collect a total of A$405.4 billion in revenue in the upcoming financial year, while paying A$434.5 billion in expenditure, leaving an forecast deficit of A$29.1 billion. The Australian Government has been running budget deficits since the 2008/09 financial year.

 

Australia is one of New Zealand’s largest trading partners, as well as the home of significant numbers of New Zealanders. It is therefore important to understand the direction the Australian Government is trying to push the Australian economy, especially given the decline in GDP last year and the rise in unemployment numbers.

 

The Australian Government with its policy announcements is looking to target three interesting areas that should be highlighted, these are:

 

  • helping small businesses in Australia to grow and invest, and therefore employ more people and be more profitable;
  • helping youth into employment to lower the number unemployed and on welfare; and
  • increasing tax revenue through closing tax loopholes on digital downloads

 

In these three areas, the following individual policies have been presented:

 

  • Accelerated depreciation for small businesses on new assets under A$20,000
  • Tax cuts for small businesses with annual turnover of under A$2 million
  • A$330 million to implement a youth employment strategy
  • GST to be charged on all overseas digital downloads

The accelerated depreciation for small businesses, will allow them to purchase new assets under $20,000 for the next two years and get an immediate tax deduction. This policy is being brought in to encourage small businesses which form a significant portion of all businesses (around 90 percent of all businesses) in Australia to invest in new equipment and machinery, leading to greater productivity, as well as greater volumes of economic activity.

 

In comparison, New Zealand companies only get an immediate tax deduction on assets under $500 in value. With small businesses in New Zealand making up the vast majority of businesses, would a similar measure be considered in New Zealand to help small businesses to invest in new machinery and equipment?

 

The Australian Government is lowering the tax rate for small businesses with annual turnover of under A$2 million from 30 percent to 28.5 percent. This policy again recognises the importance of small businesses to Australia’s economy, and is aimed at helping them to grow and employ more workers.

 

In comparison, all New Zealand businesses pay a flat tax rate of 28 percent. The Budget provides over $330 million in targeted spending on new jobs initiatives aimed at employers and young job seekers to support the transition to work. The Australian Government is

undertaking this action to ensure young Australians are not at risk of becoming long-term unemployed, welfare dependent and disconnected from society. This funding will be targeted at community-based organisations to provide flexible and holistic support to help these young people find and maintain employment or take up an apprenticeship or traineeship.

 

In New Zealand we have the youth guarantee program, aimed at supporting students into vocational study, which had around 14,000 students enrolled in 2013. Gateway, a program aimed at helping secondary students to get access to workplace learning, also had around 14,000 students enrolled in it in 2013.

 

Both countries focuses on youth and the above schemes are aimed at ensuring youth are supported in their move from secondary school to further tertiary learning or into employment, so as to limit the numbers who become welfare dependent and long-term unemployed.

 

The Australian Government, as part of the 2015 Budget, is looking to collect GST from overseas companies that provide digital content, including games, movies and television. How exactly this policy will work has yet to be released, but it likely that the Australian Government will target and work with the larger providers of digital content, such as Apple, Netflix, Google and Steam.

 

In comparison New Zealand does not collect GST from digital content downloaded from overseas providers. If the Australian Government is successful in closing this GST loophole, it might well be just a matter of time before the New Zealand government follows suit.