Private leaders unstimulated by handouts

04/03/2009 - 22:00

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WESTERN Australia's big private businesses hold surprisingly uniform views on most subjects, and that extends to the federal government's $52 billion in extra spending via two stimulus packages.

Private leaders unstimulated by handouts

WESTERN Australia's big private businesses hold surprisingly uniform views on most subjects, and that extends to the federal government's $52 billion in extra spending via two stimulus packages.

Not one of the business people approached by WA Business News believed the handouts, which have amounted to about $23 billion (including $10 billion in December and almost $13 billion last month) in two different packages, was good policy or had any effect.

All, however, think that elements such as spending on education and hard infrastructure are a sensible use of government funds, though most considered the best stimulus would involve private sector investments.

Coogee Chemicals executive chairman Gordon Martin, who is also chancellor of Curtin University, reflects this view.

"You need investment to get extra employment," Mr Martin said. "Short-term fixes in terms of handouts like we are doing is obscene. You have to get the private sector investing again.

"The collective decisions of private sector employers are infinitely more efficient and effective than governments saying 'we'll build another railway or freeway'."

While the government's original 10 per cent investment allowance did not appear to be that enticing, the most recent shift to allowing certain businesses to write-off an additional 30 per cent of capital expenditure against income this financial year was seen as reaching a reasonable level of incentive, according to those spoken to by WA Business News.

Most, however, had not seen the detail of the 30 per cent proposal before being interviewed.

Lionel Samson & Son managing director Dick Erskine said the idea could prompt some investment, though it would be limited because the company was preserving capital at the moment.

"It might be an incentive to say let's do it," he said. "To have investment in capital you have to have cash flow to pay for it.

"Right now we are retaining capital and putting off every capital investment we can."

Croissant Express's Jonathan Huston believes the investment allowance is not aggressive enough and will not have the desired effect.

Mr Huston said the allowance should have been doubled and mandated over two years.

Every cent of tax revenue the government forgoes would be recovered from future income earned from new investment.

As for the rest of the package, Mr Huston echoes the sentiments of others in private business.

"I think the community works program was excellent, that is FDR New Deal stuff, but the family payment is a disaster," he said.

Economists such as National Australia Bank's Alan Oster believe further stimulus spending will move away from handouts and focus more on infrastructure. Mr Oster says up to $15 billion more could be injected into the economy.

But many in private business believe the stimulus package is sending the wrong signal to consumers - a kind of panicked response that will make the average person more concerned about spending rather than less so.

"I think the federal government has done a real disservice in the past two to three months in being extremely negative, rather than being constructive," Mr Erskine said.

Milne AgriGroup managing director Graham Laitt will find plenty of supporters in business for where he believed real stimulus should occur.

"If you really want to protect jobs they should do something about payroll tax," he said.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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