Sydney Morning Herald  13th May 2015 

Business columnist

It is a cash splash limited only by the imagination. It will cost billions of dollars and it is the centrepiece of the Abbott government’s get-out-of-jail budget as it looks to shore up votes ahead of an election next year.

From 7.30pm on budget night Australians operating small businesses – and there are millions of them – will be invited to go on a spending binge for two years to stimulate the economy.
If this doesn’t pull the Abbott government out of the poll doldrums, nothing will.

It has been labelled the make or break budget and it is. It is a stimulus package masquerading as a “prudent approach to spending” to get the economy back on the road to a surplus amid soft commodity prices and falling tax revenue.

It is hard to believe this is the same government that authored last year’s “budget emergency” that split the population into “lifters” and “leaners” and called an end to “the age of entitlement”.

The small business package has been costed at $5.5 billion but it could be far more if Australians let their imaginations run wild to the endless lurks and perks Treasurer Joe Hockey is serving up as part of a grand buffet of stimulus offerings.

They include an immediate tax deduction on asset purchases of up to $20,000 – applied to an unlimited amount of purchases. Everything, literally including the kitchen sink, is available for a tax deduction for businesses that earn less than $2 million a year in revenue.

You don’t have to have a company, just an ABN. Australians will be tripping over themselves to set up a new business to qualify for the generous tax deductions and cut to tax rates.

As the Treasurer said in his speech: “If you run a cafe, it might be new kitchen equipment, or new tables and chairs. If you’re a tradie, it might be new tools or a computer for the home office. Cars and vans, kitchens or machinery … anything under $20,000 is immediately 100 per cent tax deductible from tonight.”

You can almost hear the tills ringing – and share prices surging – at JB Hi-Fi, Bunnings, Myer, Officeworks and any other business that sells a product that can be claimed by a small business as a tax deduction. Goodness knows some of the retailers need the extra spending but the intent is more widespread than that.

Put simply, if the package does its job it will have a multiplier effect that will lift business confidence and consumer confidence, both of which have proved stubbornly difficult to move.

Whether the package is sensible, doesn’t come into it. It is all about politics. As Goldman Sachs economist Tim Toohey recently said: “The economic orthodoxy so prevalent in Australia over the past 20 years of deficit and debt reduction at all costs has been shaken.”

This is a budget with lots of carrot for middle Australia and a big stick for tax dodgers and people getting concessions they are rich enough not to need.

It carries some of the hallmarks of the stimulus package released during the global financial crisis by the then Rudd government. Whether it results in some of the same abuse, time will tell.

Read more at Sydney Morning Herald

Blog Editors Comment:

Certainly it reeks of a Kevin Rudd style budget where in 2009 he threw a $42 Billion national building and employment party, which was aimed at retaining some 90,000 jobs at the time, as a way of shielding Australia from the worst of the global economic recession. The same idea used this time by a different government is no guarantee of success, when a debt crisis of three to four times the magnitude is on its way.