The Abbott Government is dramatically reducing corporate assistance, but its planned company tax cut and parental leave scheme have been left out of the budget.
In his first budget speech, Treasurer Joe Hockey again committed to the Government’s election promise to lower the company tax rate.
“To improve business opportunities, we are cutting company tax by 1.5 percentage points for around 800,000 businesses,” he told Parliament.
However, for whatever reason, the Government’s planned company tax cut, paid parental leave scheme and the proposed 1.5 per cent levy on big business to fund the leave scheme have been left in the contingency reserve, rather than costed individually in detail in the budget.
The Australia Institute’s Richard Denniss says the absence of the parental leave scheme from the budget papers indicates uncertainty about whether it will proceed, and in what final form.
“The much awaited paid parental leave scheme appears that it will be well overdue,” he said.
“While the Prime Minister has spent a lot of time and a lot of political capital assuring voters that his scheme is on track, clearly the Treasury boffins, and maybe even the Treasurer, are far less confident.”
The absence of the company tax cut from the detailed budget measures, and the Treasurer’s notably non-time specific reference to it in his speech, appear to leave open the prospect of a delay in the business tax reduction.
Auto Subsidies Slashed
In line with the spirit of recommendations by the Commission of Audit, although perhaps not as severe as the commission’s recommendations, the Treasurer tonight announced steep cuts to a range of industry assistance.
The automotive sector will endure a net loss of money as the Federal Government has cut short or cancelled programs in response to the announcements by Toyota and Holden that they would join Ford in ceasing Australian car manufacturing.
The Government has ditched the Supporting Automotive Sector jobs program announced by the previous government just before the election, saving $100 million this year and another $100 million next.
The Government will also shut down the Automotive Transformation Scheme (ATS) on January 1 2018, after the last remaining local car assembly finishes with the departure of Holden and Toyota in 2017.
However, the Treasury says $1 billion remains available in the ATS to assist the sector from the current financial year until the scheme ends.
A further $215 million will be saved by cancelling funding for Holden’s next generation vehicle project, given that the carmaker is no longer going to produce cars in Australia after 2017.
While pulling hundreds of millions from auto assistance, the Government has committed to spending $100.6 million over six years to establish a Growth Fund to assist the Victorian and South Australian economies adjust to a future without car assembly.
An additional $50m will be provided for a Manufacturing Transition Grants Programme to assist manufacturers to move towards higher value and niche manufacturing opportunities.
One industry receiving more assistance is mining.
Not only will miners save an estimated $3.4 billion over the next three years from the abolition of the Minerals Resource Rent Tax, small explorers not making any taxable income will be able to access $100m worth of Exploration Development Incentives to pay as a refundable tax offset to their Australian shareholders.
Training and Enterprise Assistance Cut
The Government has moved to consolidate a range of separate industry assistance programs while cutting overall funding for them.
The budget announces the creation of the Entrepreneurs Infrastructure Programme at a cost of $484.2 million over five years, which aims to support the commercialisation of good ideas and provide market and industry information and advice.
However, related to the establishment of this one-stop shop, the Government is eliminating eight separate industry assistance bodies and programs that perform a similar function to save $845.6 million over five years.
It will also save $124.7 million over five years by reducing funding to Clean Technology (Investment and Innovation) programmes and Cooperative Research Centres.
In a similar move, the Commonwealth will also save more than half a billion dollars by abolishing 10 different skills and training programs and rolling them into one Industry Skills Fund to support the training needs of small and medium enterprises, focusing on health, mining and advanced manufacturing.
Businesses will be required to make a co-contribution to the cost of training, with the size of the contribution depending on the size of the business.
The Government is also making a large saving by dropping the ‘Tools for your Trade’ apprenticeship assistance program to save $914.6 million, and replacing it with Trade Support Loans costing $439 million – a net saving of $475.6 million over the forward estimates.
Renewables and Research Reductions
As expected, the Abbott Government has used its first budget to make steep cuts to renewable energy and scientific research funding.
The Government is saving $338.5 million over the forward estimates, and $1.3 billion over the five years starting in 2017-18, by abolishing the Australian Renewable Energy Agency.
It is also slashing funding to the Carbon Capture and Storage Flagships Program by $162.9 million in the forward estimates, and a total of $459.3 million to 2019-20.
The budget also revealed a $16.8 million cut to funding for the National Low Emissions Coal Initiative.
Australia’s scientific research agencies are taking a substantial budget hit, with the CSIRO’s funding cut by $111.4 million over four years, the Australian Nuclear Science and Technology Organisation’s budget reduced by $27.6 million, and the Australian Institute of Marine Science losing $7.8 million.
However, medical research is being boosted by a fund that will distribute $276.2 million over the three financial years starting in 2015-16, and ultimately aims to provide $1 billion per annum in medical research funding by 2022-23 by investing the savings from cuts being made elsewhere in the health budget.
Subsidies to biofuel producers are also being ditched in favour of excise reductions, which will cost the budget significantly less.
The budget outlines a saving of $120 million over six years by ceasing the Ethanol Production Grants Program and instead reducing the excise on domestically produce ethanol.
The Government will also save $156 million over four years by eliminating grants under the Cleaner Fuels Grants Scheme and instead cutting the excise on biodiesel.
Competition Watchdog Benefits, Corporate Regulator Loses Out
The Government seems keen to focus on small business and enforcing competitive markets, with the Australian Competition and Consumer Commission receiving a $68.5 million funding boost over four years.
There is also $8m in extra funding in the budget to turn the existing Office of the Australian Small Business Commissioner into a Small Business and Family Enterprise Ombudsman with extra powers and functions to act as a one-stop shop for small business interactions with Government.
However, the main corporate and financial market regulator – the Australian Securities and Investments Commission – loses $120.1 million over five years, in a widely anticipated steep budget cut.
The Government has also confirmed in the budget that it will be investigating the potential privatisation of ASIC’s corporate registry function.
Australian Hearing, the Defence Housing Authority and the Royal Australian Mint are also being investigated for privatisation.
As expected, the Australian Taxation Office is losing $142.8 million in funding over the forward estimates, partly in response to the increasing automation of tax returns.
Super Up, First Home Savers Out
To end uncertainty for businesses, the Government has confirmed the superannuation guarantee will go up to 9.5 per cent on July 1, costing the Government $350 million in extra super concessions.
However, it will then be frozen until June 30 2018 – beyond the end of the forward estimates – before increasing 0.5 per cent a year thereafter to eventually hit 12 per cent. This freeze will save the Government $440 million in 2017-18.
The Government is also making $143 million in savings over five years from ditching the First Home Saver Accounts scheme, effective for new accounts opened from tonight.