Economic recovery is a global priority, for governments broadly and the accounting profession. With interest rates at record lows, monetary policy offers limited scope to achieve this goal. Governments worldwide will need to implement measures to support recovery while balancing long-term fiscal sustainability, writes Dr Jane Rennie, general manager – external affairs at CPA Australia
Last year, many governments delayed their annual budget announcements due to the pandemic. Meanwhile others announced support measures outside of their normal budgetary cycle. Consequently, some 2021-22 budgets have begun to – or will soon – be handed down.
Globally, we are in an environment of increased economic optimism, but it is optimism tinged by a high degree of uncertainty. Many governments (necessarily) carry very large and growing deficits.
CPA Australia is one of the largest professional accounting bodies, representing over 168,000 members worldwide. We recently made a series of recommendations to the Australian Government in our 2021-22 Federal Budget Submission. Although focused on the Australian budget, due in May, the principles in our submission are broadly applicable and make for interesting comparisons to other national budgets.
Small business support
Like many countries, small business is Australia’s biggest employer. It is in the public interest that viable businesses are supported through this time so they can continue to create jobs and sustain our economy.
Many Australian businesses and not-for profits are still focused on survival. They have limited capacity to implement new requirements. We have urged the government to prioritise policies that are central to Australia’s recovery and delay or cancel those that are not.
At the height of the pandemic, broad-based financial supports were used to support businesses. With positive economic momentum building, we recommended more targeted measures for businesses that continue to be severely impacted.
CPA Australia recently completed our 2020-21 Asia-Pacific Small Business Survey. Most businesses in the 11 markets we surveyed made in-roads on digital transformation during the pandemic. However, in 2020, Australian small businesses were less likely to invest in, use, earn from or offer customers the use of digital technologies than their Asia-Pacific counterparts. This digital divide will make Australia’s road to economic recovery longer and tougher than it needs to be.
Australian businesses clearly need more help than they are currently getting to leave the digital dark ages behind. CPA Australia has called on the government to invest in improving the digital capability of small businesses.
Government initiatives to stimulate employment and investment are more likely to achieve their policy aims if they are complemented by policies that incentivise business to seek professional advice. Professional advice can increase the likelihood and speed of business recovery. Conversely, businesses that do not access such advice are more likely to underperform or fail.
To support small business recovery and transformation, we recommend that the government offers financial incentives to struggling businesses to help them access professional advice.
Australia has some of the highest personal income tax rates in the OECD. So, while other countries are contemplating increasing taxes, we recommended the government provide income tax relief to individuals. We think this will provide a boost to the economy and consumer confidence. As many Australian small businesses are unincorporated, they would directly benefit from these tax cuts too.
Australia’s corporate tax rate – 30% for large and 26% for small businesses – is also much higher than the OECD average. It is our long-standing position that this rate should be lowered to help businesses improve their cashflow and enhance Australia’s international competitiveness.
In Australia, as elsewhere, it is highly likely that there will be a surge in the number of insolvencies this year.
To help manage this increase and better protect the rights of creditors, we have called for the government to fund a program to support insolvency practitioners to wind up assetless companies in distress.
We have made our position on environmental sustainability clear to the Australian government. We regard climate policy as indivisible from health and economic policy in a post-Covid-19 world. Climate policy is a ‘must have’ not a ‘nice to have’ when it comes to economic recovery.
Globally, we have seen some countries committing to ‘build back better’ in the wake of Covid-19 by embedding environmental resilience in their economic policies. We have urged other governments to do the same.
CPA Australia also made a Budget Submission to the Hong Kong government. We have recommended a range of short-term measures to support businesses and households to weather the prolonged effects of the pandemic and longer-term reforms to improve the healthcare system, maintain public finance sustainability and improve competitiveness.