Federal Budget | Australia’s small-to-medium businesses have their say

March 26, 2019

The 2019 Pitcher Partners pre-Budget survey of business owners, CEOs and directors has again collected opinions from within the engine room of the economy – the Australian middle market – reflecting their hopes and concerns for the Australian economy and their expectations of the soon-to-be-delivered Federal Budget.

Interestingly, results point to an expected change of Government at the looming Federal Election with almost half of business leaders (49%) pessimistic on the likelihood that April’s Federal Budget will be implemented.

The majority of the respondents believe the current Government is managing the local economy well but are keen to see more policies that support small-to-medium businesses, with 58.5% of that group seeking a simpler tax system. Other notable policy requests included further tax incentives and funding for investment in major infrastructure projects and social spending on health, education and welfare.

When asked if the Government was doing enough to support middle-market businesses, responses were divided with most respondents (46%) selecting neutral or unsure, 20% agreeing and 34% disagreeing.

Despite being critical of its level of proactivity supporting small-to-medium businesses, 70% of respondents believed the current Government was managing the local economy well. This is an improvement on the attitudes recorded during the lead up to the 2018 Budget where 39% deemed economic management to be poor and just over half of those surveyed felt the Government was managing the economy well.

Delving deeper into the thoughts of business owners and operators, the survey found that while half of respondents believe the Federal Budget will be sympathetic to the needs of middle-market business, a quarter expected a slightly negative impact on businesses. Over a third (35%) expected the Budget’s impact on individuals to be negative.

When it came to capturing perceptions on the impact of the Budget on the Australian economy, respondents were equally divided across the scale from potentially positive through to potentially negative.

For the second year in a row, business owners seek a reduction in red tape with 65% of respondents citing it as the most likely factor to positively impact business. Calls for a reduction in the corporate tax rate also ranked as important, with respondents citing it as a critical factor to encouraging growth and productivity for small-to-medium business.

When asked how respondents would apply the savings delivered via hypothetical company tax concessions, four key areas emerged: reduce company debt, invest in plant and equipment, employ more staff and distribute profits to owners.

Shifting focus to the superannuation system, when surveyed about their understanding of super rules and their impact, most respondents (64%) indicated that they had a solid comprehension of the system, 20% were neutral and a little under 15% felt they did not have a good understanding of the rules. More than half of respondents agreed it would be difficult for younger generations to save for retirement under the existing rules.

When asked about anticipated changes to their business in the coming 12 months, most survey respondents believed costs would increase and cited increases in supply-chain and wage costs as the likely reason. At the same time, 90% of respondents expect the prices they charge to remain the same or increase, while only 10% expected their prices to decrease.

Looking at economic indicators in the coming year, survey respondents expect the economy to remain the same or grow slightly, while also expecting wages and subsequently unemployment to grow. Inflation is expected to rise, while expectations of future changes to interest rates were evenly spread across moving up and down.

The survey respondents identified themselves as mostly business owners or senior leaders of businesses and organisations across private, public and not-for-profit sectors, spanning a broad range of industries including professional services, financial and insurance services, construction, real estate, manufacturing, transport and logistics, health and education.

Summary of findings

  • Pitcher Partners surveyed over 240 business leaders including business owners, CEOs and directors, and executive managers.
  • 61% of respondents ranked “measures to promote small to medium sized businesses” as one of the top five areas of priority for the forthcoming 2019-2020 Federal budget, followed closely (58%) by “simplifying the tax system”.
  • 70% of survey respondents believe the current government is performing well when it comes to managing the Australian economy. Conversely, one-third believe management of the economy is either poor or very poor.
  • 65% cited “reducing red tape” as a key measure the government could adopt to support business, while 42% cited “further reducing the corporate tax rate”.
  • 35% of respondents support “further extending the instant write off for assets under $25,000”.
  • Those eligible for a lower company tax rate were divided about how they would utilise tax savings: 37% would reduce company debt, 36% expected to invest in plant and equipment and 36% would employ more staff (respondents could select multiple responses).
  • Reforms made to the superannuation rules were understood by most respondents (64%) and 59% believe those rules will make it difficult for younger generations to save for retirement.
  • In the coming year, 43% of respondents expect to keep the prices they charge for goods and services the same, despite 71% anticipating a rise in wage costs.

Most respondents (72%) expect economic conditions to remain stable or increase slightly, and for unemployment to remain at about the same (58%). A quarter of respondents anticipate the unemployment rate to increase.

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Rob Southwell

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Managing Partner and Partner – Private Business and Family Advisory

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Managing Partner - Private Business and Family Advisory

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