Tony Abbott’s first budget seen as win-win for business, but consumers may be hit warns ARA boss.The federal budget 2014 has just been announced, and Australians need to be either ‘earning or learning’, warns Treasurer Joe Hockey.
It seems old people, students, under 30’s and the disabled are the big losers in Budget 2014, but seen as a win-win for the business community.
There are two major changes announced by the Treasurer that could have a negative impact on consumer spending and confidence, believes Australian Retail Association Director, Russell Zimmerman.
Consumers will be hit by the just announced (2%) deficit tax which will target higher earners on over $180,000 per year.
“Its a concern but not a huge one,” he told CN. The budget will also hit lower income earners pockets via the new fuel tax, which is a “far bigger concern,” he warns.
“We are only just beginning to see retail and the services sector regain momentum after many years in the doldrums. It would be a travesty if these tax increases impacted on that recovery to the sector and the services economy.”
But economic growth is set for a slump new figures show, and is expected to grow 2.75% in 2014 but fall to 2.50% next year.
However, the retail association praised some of the budgets other measures, widely seen as a win-win for business, and the government for tackling overspending.
“Overall, its a good budget… but we need to hope confidence remains strong and the Reserve don’t increase interest rates,” says Zimmerman.
However, he expressed “disappointment” about the lack of movement on the removal of the low value GST exemption for overseas goods under $1000.
Other pro-business measures announced in Budget 2014 include; 1.5% point cut in the tax rate; removal of $1 billion of red tape per year; and employers will also be incentivised to employ someone over 50, with a carrot of $10,000 per year.
This is a “great incentive” for employers to take on more staff. A lot of people over 50 are unable to get employment, said Zimmerman, citing recent closures of Holden factories.
However, this measure may be a disadvantage for younger workers seeking unemployment, whose dole payments have already been sliced, and will now have to wait six months to be eligible for welfare payments.
The national work development scheme has also been abolished, but a new scheme targeted at retail and services was also announced by Hockey. Infrastructure spending by all governments and the private sector will grow to $125 billion.
Savanth Sebastian, Commonwealth Bank Market Analyst says “business is the winner from the Federal Budget.”
“With conservative forecasts like growth staying below trend and a jobless rate of 6.25%, we are likely to see a surplus much sooner than expected.”
The budget deficit is expected to be $29.8 billion next year.
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