The federal budget suggests a very strong economic and labour market recovery in all respects save for wages, which are expected to decline in real terms. Meanwhile, many budget initiatives which the Panel can assume will be implemented over the next financial year will generally contribute to business investment and lower operating costs, including some direct wage subsidies.
There are a number of initiatives announced in the federal budget with potential relevance to the living standards of workers and the costs of doing business over the forward estimates period. In keeping with previous authority, we do not urge the Panel to take into account initiatives announced in the budget which require legislation in order to come into effect, or which will come into effect only after the next Annual Wage Review is conducted.
We are pleased that the government intends to remove the $450 monthly income threshold for the making of employer superannuation contributions. The monthly threshold is one of the factors contributing to women’s lower retirement savings and tends to impact part time and casual workers, including multiple job holders. The removal of the threshold will likely impose additional costs on some employers while also removing artificial incentives to the distribution of hours of work among casual workers in particular. As this initiative requires legislative amendment, it is not appropriate for the Panel to take it into account until the relevant legislation has passed and the costs to award reliant employers can be estimated.
Similarly, the budget foreshadows an intention to raise the level of child care subsidy for a second child onward from 85% to 95% and to abolish the cap on subsidies for higher income earners. These reforms are not proposed to commence until 1 July 2022 and would require amendments to be made to Schedule 2 of the A New Tax System (Family Assistance) Act 1999.
The wage costs for employers of apprentices will be continue to subsidised through an expansion of the Boosting Apprenticeships Commencement program. In its current state, the program was due to close to new apprentices and trainees on 30 September 2021 and was capped at 100,000 participants. The budget has extended that closing date to 31 March 2022 and removed the cap on participants. The subsidy remains at the level of up to 50% of the apprentice or trainee’s wage up to a maximum of $7,000 per quarter. The lifting of the rate of job subsidy from $6,500 to $10,000 for youth (25-29 years), parents and the long term unemployed through the jobactive, transition to work and ParentsNext programs was also announced, with funding of $15.6 million commencing in 2021-22.
The budget has announced the government’s intention to retain the low and middle income tax offset for the next financial year, meaning no change in net position on this issue for impacted workers relative to the current state. The low and middle income tax offset is governed by Subdivision 61-D of the Income Tax Assessment Act 1997.
The announced lifting of Medicare Levy threshold amounts is intended to take effect from 1 July 2020 and may provide a small benefit at tax time for a some part time award dependent workers ($425 lifting in the threshold for a single person) . However, as the level of the relevant thresholds is fixed by the Medicare Levy Act 1986, it ought not be taken into account unless the relevant amendments are made prior to the Panel’s decision being issued. In addition, the announced change to allow the first $250 of expenditure of on prescribed courses of education is due to be available only in the first year financial year after legislation is passed. The initiative effectively only applies to up skilling toward an additional formal qualification in a current occupation, rather than re-skilling. It is difficult to assess its value against the value of any hours of work forgone through the necessity to study.
Temporary full expensing for businesses with turnover under $5 billion has been modified. The $17.6 billion policy works by allowing businesses to purchase assets and then claim the costs of those assets as a deduction in the income year in which it first used or installed, provided that occurs before the end date of the policy. The change announced is to extend the end date of the policy from 30 June 2022 to 30 June 2023. This may provide business with additional confidence to invest in medium term asset renewals and assist in driving productivity improvements. It is bolstered by the extension to the loss carry back scheme, in the sense that tax losses generated through full expensing may provide a basis to offset profits taxed from 2018-19 onwards.
Employers in hospitality, tourism and agriculture industries experiencing staff shortages may benefit from the decision to allow student visa holders to work more than the usual 40 hours per fortnight. It is not clear at this stage how many hours those students will be permitted to work. Changes to visa conditions such as the work rule applicable to subclass 500 visas can be given effect to via amendments to Schedule 8 of the Migration Regulations 1994. It is unclear at this stage whether the change will be given effect to in that way or merely via non-enforcement of the existing requirement. We recognise that access to additional work will assist persons on student visas to meet their needs. However, we ask the Panel to be mindful that increasing the supply of visa workers to these sectors will do nothing to stimulate market driven wage increases. Rather, such workers will be heavily reliant on the minimum wages determined by the Panel.
A number of funding arrangements have been made in relation to aged care. In our experience non-nursing staff in particular in this sector are generally not covered by enterprise agreements. Whilst most are targeted initiatives which may not contribute to meeting the standard operating costs (including labour costs) of aged care facilities, the $10 additional funding per resident likely will, whereas the 30% increase to the viability supplement likely will with respect to residential care and home care in rural and remote areas. It is not clear to us when this additional funding will become available, although the current schedule of fees and supplements published by the Department of Health indicates the current amounts are applicable only until 30 June 2021.
We note that community pharmacies – a section of retail trade that tends to be award reliant – will be one of the beneficiaries from the allocation of $777.8 million in connection with the administration of COVID-19 vaccinations.
The budget also includes 10 pages of funding to State and Territory infrastructure projects totalling $13.2 billion over the forward estimates period, which should contribute to employment of skilled trades.
Finally, a number of fee relief and funding arrangements have been announced for the education sector which should provide some reduction in operating costs and relief in recognition of the decline in international students. These include an automatic waiver of $17.7 million in fees charged to over 3,500 providers by the Commonwealth Register of Institutions and Courses for Overseas Students, the Tertiary Education Quality and Standards Agency and the Australian Skills Quality Agency until 31 December 2021 and $26.1 million funding to around 100 non-university higher education providers to fund an additional 5,000 short course places for domestic students.