September’s federal election will affect your business finances regardless of which party occupies the treasury benches. Guest writer Anthony Fensom, provides a quick guide on how the policies of both major parties are shaping up.
The incumbent: Kevin Rudd
Prime Minister Kevin Rudd’s Labor Party has pledged “to work with Australian industry to increase exports, help Australian businesses to grow and put Australian jobs first”.1
Key business policies include the National Broadband Network, its Tourism 2020 Strategy and Enterprise Connect. On the economy, Rudd has said the China-led mining boom is over and the budget will not return to surplus until 2017.2
1. Higher interest rates
Labor’s failure to achieve a budget surplus has caused higher deficits, with government borrowing potentially “crowding out” private investment and causing higher interest rates.
Offsetting this is weaker economic growth, Australia’s relatively low public debt level and mild inflation, which has seen official interest rates at their lowest level in 50 years.
2. Lower mining investment
Rudd has announced plans to abolish the carbon tax, however it will be replaced with an emissions trading scheme that will ultimately cost large power users. Labor remains committed to its minerals resource rent tax, despite its failure in raising only a tenth of the forecast $2 billion.
3. Support for manufacturers
While manufacturers bore the brunt of the original carbon tax, the automotive industry has benefited from billions of dollars of handouts. This will likely continue should Rudd win re-election, with other industries also likely to seek aid.
The challenger: Tony Abbott
Opposition Leader Tony Abbott’s Liberal Party has pledged to “deliver a strong, prosperous economy and a safe, secure Australia”.3 Its priority will be to “build a stronger, more productive and diverse economy through lower taxes, more efficient government and more productive businesses”.
1. Reduced government spending
While the details are yet to be announced, Coalition pledges to cut waste and reduce debt are likely to mean reduced spending, which will impact businesses with government contracts and particularly those based in Canberra.
2. Parental leave levy hits business, retirees
While the Coalition has pledged to cut the company tax rate by 1.5 per cent, it also plans a 1.5 per cent levy on businesses with over $5 million a year in taxable income to fund its paid parental leave scheme.4
Business groups have criticised the $5.5 billion scheme for undermining those already in place by large companies, while retirees face a hit from the company tax cut due to lower franking credits on share dividends.5
3. Lower wage costs
Businesses should benefit from lower wages under the Coalition, which may implement measures to curb union influence as well as supporting 457 visa workers. Further changes may result from a Productivity Commission review of theFair Work Act, although the Coalition has pledged to put these to voters in 2016.
Whichever way you look at it, the upcoming election poses considerable financial implications for businesses of all sizes. Both major party policies have their pluses and minuses which will ultimately have a flow on effect to your personal finances.
What policies have the most impact on your business?
The views expressed in this article are those of the author and are not necessarily those of the Rabobank Group[Sources]