The heads of several leading aggregation groups have welcomed the budget 2020-21 but noted the “gut-wrenching” size of the deficit.
On Tuesday (6 October), the federal government handed down the 2020-21 budget, outlining a range of tax cuts and spending initiatives aimed at creating jobs and boosting economic activity.
Among them was a range of measures for small businesses and consumers, including the expansion of the First Home Loan Deposit Scheme by an additional 10,000 places, the removal of capital gains tax for granny flats, and enabling 99 per cent of businesses (those with a turnover of up to $5 billion) to be able to write off the full value of any eligible asset they purchase for their business until June 2022.
The budget was initially expected in May (and to focus on removing the deficit), but this was postponed when COVID-19 hit Australian shores and refocused to support economic growth and help bring back jobs for the millions of Australians who are estimated to have lost them.
Indeed, instead of a surplus, the budget will see a record deficit of $213 billion this year, $112 billion next year and $87 billion the year after that.
A once-in-a-century budget: AFG
Speaking to The Adviser, AFG CEO David Bailey said the federal government had the “unenviable task of steering the country into the most significant level of debt ever incurred”.
While Mr Bailey said the “gut-wrenching number of $1 trillion in gross debt” being proposed was “difficult to swallow”, he acknowledged that “these are unusual times”.
The AFG CEO outlined that the government had “pinned the country’s recovery hopes on the private sector with billions in expenditure on measures to increase employment and investment”.
“Businesses and workers are the major winners from the budget, and it is a sensible strategy. Without confidence, business won’t invest, and without business investment, there will not be the employment lift the government is targeting,” Mr Bailey told The Adviser.
“Training and job incentive programs, personal tax cuts, investment allowances and infrastructure programs are sensible levers for the government to pull. Measures to improve cash flows of business in terms of historical tax paid when losses incurred in the current period will also assist business.”
Looking to mortgages, Mr Bailey said the moves to improve home ownership with “targeted measures to help first home buyers (and, in turn, stimulate the construction industry) will support our industry, and tax cuts will help household budgets, which is a positive for home buyers”.
“As a major intermediary for the access to credit, brokers will not only be needing to continue to play a vital role for home buyers, but also increasingly for business,” he said.
Mr Bailey said he was particularly pleased to see additional funding to support the construction of affordable housing.
“Money spent in this way not only helps secure much-needed support for vulnerable people in our community, but also generates construction employment,” he said.
Mr Bailey concluded: “Unfortunately, the flat population growth forecast due to the lack of migration will impact the housing market, particularly apartments, when we consider the loss of international students.
“And of course, as the Treasurer pointed out, the budget is based upon assumptions of a globally available vaccine and of borders to be able to open again.
“It is a once-in-a-century budget for a (hopefully!) once-in-a-century pandemic.”
Opportunities for asset finance brokers: Connective
Likewise, Connective director Mark Haron said there was “solid investment in businesses and tax cuts”, which he suggested would benefit brokers and their clients.
He explained: “Businesses and taxpayers are the winners. We’re hoping the additional income in taxpayers’ pockets will stimulate the economy, increase confidence and borrowing capacity.
“I’m optimistic about the impact on the property market. The expansion of the FHB scheme by 10,000 places is very welcome, particularly as the first allotment was snapped up and the first home buyer purchases have remained strong throughout the pandemic. And capital gains tax will now be scrapped for granny flats, opening up opportunities for borrowers.”
Mr Haron also welcomed the move to increase investment in low-cost finance to support the construction of affordable housing and additional investment in the Indigenous Home Ownership Program.
The Connective director concluded: “There are also plenty of opportunities for our asset finance brokers to support their clients and strengthen their pipeline through the expanded instant asset write-off available to 99 per cent of businesses and cash injections across key industries.
“The instant asset write-off and the JobMaker wage subsidy are both terrific ways for our members to invest in their business and their future.
“Over the last 12 months, brokers have stepped up to support their clients through very challenging times – drought, fire, floods and a global pandemic,” he said.
“Many businesses in the mortgage and finance broking industry have performed well this year by providing crucial support to their clients.
“However, it’s important that, as an industry, we embrace these opportunities to ensure we help the Australian community recover,” Mr Haron told The Adviser.
Brokers at the frontline of the economic recovery: Loan Market
Loan Market executive chairman Sam White said the budget would help entice borrowers into the market and would put brokers and real estate agents “at the frontline of the economic recovery”.
Mr White said supporting first home buyers and mum and dad upgraders would also help offset forecast low levels of migration – a driver of real estate demand – as other nations still grapple with COVID-19.
“The budget has laid the footings for borrowers to rebuild the economy,” Mr White said.
“While FHBs and upgraders benefit directly from the incentives and tax cuts, the flow-on benefits of the activity will benefit the wider economy – everyone from conveyancers to removalists, carpenters to furniture retailers.”
Noting that the FHLDS extensions comes hot on the heels of the announcement that government would remove responsible lending laws, Mr White said: “The government clearly wants borrowers to encounter fewer roadblocks in seeking finance.
“An active property market supports jobs in the real estate and construction sectors, generating stamp duties for state governments at a time when they’re rebuilding from COVID.”
Loan Market also welcomed the budget’s digital investments and employer incentives.
Mr White noted that the $4 billion JobMaker scheme – offered over three years – would be welcomed by small businesses looking to rebuild their workplaces after COVID-19.
He said Loan Market also supported the budget’s business incentives, including deductions on eligible depreciable assets and offsetting losses against previous FY profits.
Mr White added that the previously announced digitisation of workplaces through the $800 million JobMaker Digital Business Plan was a “game changer” in the evolution of Australia’s SME landscape.
“For some time, the Loan Market network has been working within paperless offices and benefitting from the efficiencies of automated marketing, client data handling and more,” said Mr White.
“COVID-19 has encouraged SMEs to fast-track their digital offerings. The budget will further accelerate the transition, supercharging the wider economy,” he concluded.
[Related: Budget 2020-21 released]