Stimulus lacking from Costello’s 6th Budget

BUSINESS people praying for some economic stimulation from the Federal Govern-ment’s Budget will be disappointed.

Federal Treasurer Peter Costello’s sixth Budget offers little in terms of measures to boost business investment, something that WA’s economy relies on.

This Budget seems more aimed at ensuring Mr Costello is in power when the seventh installment comes out than offering long-term business benefits for Australia.

Good news for business is the $5 billion in tax cuts.

Company tax has been cut to 30 per cent. It was 36 per cent just two years ago.

Financial Institutes Duty and stamp duties on most share transactions are to be abolished and fuel excise was cut by 1.5 cent a litre.

But these measures already had been announced.

The only real surprise was the announcement that motor vehicles bought by businesses will draw full input tax credits, which is expected to save businesses more than $600 million in 2001-02. But even that measure had already been announced. It was expected to come into effect in 2002 and has been brought forward a year.

WA Treasury’s estimate of GST revenues for the State of $2.3 billion proved to be right on the money.

Property Council of Australia WA Branch chief executive officer Joe Lenzo said the property industry had expected more GST money to come in.

“The reduced GST revenue means the State’s ability to remove taxes such as stamp duty on commercial property is diminished, which is a big problem for the property industry,” Mr Lenzo said.

Stamp duty on commercial property is earmarked for removal in 2005.

WA Chamber of Minerals and Energy vice-president Peter Lalor was concerned at estimates of overall business investment stagnating.

“Minerals and energy investment is essential for Australia and this highlights the importance of removing barriers to exploration and new projects in our industry,” Mr Lalor said.

WA’s small business community is expected to be disappointed with the lack of economic stimulus from the Budget.

TMP director Ian Burns said the business tax cut might boost small business owners’ consumption, which in turn would help create some economic stimulus.

“I think the Government is relying on the 30 per cent tax cut to have an impact,” Mr Burns said.

“It will put some money into small business owners’ back pockets and hopefully increase their consumption – which should be a good thing.”

There are also some question marks over the Government’s commitment to innovation.

Mr Burns said the Government was only paying “lip service” to its innovation commitments.

Other measures specifically targeted at small businesses include $5 million for a Federal Government small business incubator program, $2.2 million for a small business skills development programs and $8.2 million to improve small business access to Government.

Another minor surprise was the fact the Budget came in with a $1.5 billion surplus.

Much of the talk in the lead up to the budget’s launch was of a balanced Budget.

However, when considered on a fiscal balance measure – an accrual accounting basis, the Budget will actually be in deficit next year and the year after. This reduces the scope for pre-election promises that both parties can offer but many of the Government’s pre-election promises already seem to have been catered for.

Chamber of Commerce and Industry chief economist Nicky Cusworth described Mr Costello’s latest offering as a more politically than fiscally crafted Budget.

Ms Cusworth said the Budget was putting some money out into the economy but it was targeted at specific, politically important groups such as self-funded retirees.

“There is a fair bit of capital funding through roads, in fact the most I’ve seen in a budget for some time.

“But how much of that will be spent here will remain to be seen.

“WA can hold its breath and wait and see if we get some of the defence spending.”

Australia’s economic position holds few surprises. As many commentators predicted, Australia’s inflation rate is expected to be around 2 per cent and its growth rate to be 3.25 per cent.

The rural sector is likely to give the Budget a lukewarm reception.

WA Farmers Federation policy director Andy McMillan said there was little to get excited about.

“There is no mention of the new road and rail funding that we were asking for,” Mr McMillan said.