ECONOMIC RECOVERY WELL UNDERWAY

20 November 2020

As we lurch towards Christmas, yesterday’s release of labour force data by the ABS provides one reason to smile: our economic recovery is well under way. 

With the State of Origin a distant memory, NSW now has the lead on the economic scoreboard, with our unemployment rate down to a respectable 6.5 percent; the lowest among the states. We saw 36,000 new jobs created amid encouraging signs that participation is improving, meaning people are confident to return to the labour market and look for work.

Nationally, consumer confidence has steadily improved over each of the last eleven weeks, which is a great sign for retailers coming into the Christmas season and reflects the fact that 80 percent of those who were out of work back in April are now re-employed.

It’s important to be mindful of the rates of under-employment; those of us who cannot find enough work (or hours) to make ends meet despite being technically employed. This new data shows that nationally, under-employment has dropped a full percentage point to 10.4 percent, with hours worked increasing by 21 million hours since last month.

Economic recovery in the Illawarra is a patchwork affair, and unfortunately real time data is rubbery at best as it is based on a small sample size. 

Fundamentally, it will rely on the state government’s ongoing ability to control the spread of the virus – which so far has been exemplary. It will also need our region’s major employers to retain their workforce, and this has been more of a mixed story. 

The University of Wollongong faced the combined impact of both the border closures, which shut the pipeline of international students, and lockdowns, which forced their classes online. Our aged care sector confronted the unexpected costs of protecting their vulnerable residents within a pre-existing deficit of both funding and available staff.

However, thanks largely to the interventions of federal and state governments, our small business sectors are on the comeback trail. Accommodation and food services was the hardest hit and is now recovering month on month whilst working within strict parameters set by our health experts. The arts and recreation sector is making a slower recovery and must contend with the glacial relaxation of limitations on public gatherings. 

The dining and entertainment vouchers announced in this week’s state budget will see $500 million injected into these sectors early next year; a welcome boost to the bottom line for these hard-working operators following a horror year. 

For these reasons and several others, the state budget was a winner for small business, and above all we finally saw some serious progress on the reform of state taxes.

Any economist will tell you that the state taxes on payroll and property are inefficient; meaning that they act as disincentives to both the employment of new staff and the purchase of land – essential elements to our economic growth and prosperity.

A few years back, the business chamber fought hard to see the threshold at which an employer must start paying payroll tax increased from $750,000 to $1 million. This budget took this further – to $1.2 million – and lowered the rate of the tax from 5.45 to 4.85 percent for the next two years. 

Those smaller businesses who are exempt from payroll tax will receive $1,500 vouchers to offset government fees and charges and there will be a $5 million program to help businesses apply for tenders.

The budget also contained a proposal to allow purchasers of residential and commercial property to pay stamp duty and land tax up front, or pay an annual property tax instead. This is now a matter for consultation over the next three months, and a welcome move after many years of lobbying.

In my conversations with the Small Business Minister, he concedes that tax reform is essential, but can only be delivered once the revenue streams are replaced; most likely by the Commonwealth. All credit then to the state government then for going it alone, because no federal changes to the distribution of GST or otherwise are on the table.

The state government also continued its commendable investment in economic infrastructure. While it had previously been funding this with the proceeds of the sale of assets, including Port Kembla, now this will increasingly be funded by debt, which has the benefit at least of being cheap. 

Our campaign for the upgrade of Picton Road was successful, with the budget containing initial funding to commence important planning work. This was the product of many businesses, councils and parliamentarians across our region working together to drive the outcome: truly a win for the community. 

Another key economic thoroughfare in the Albion Park Rail Bypass is set to be completed ahead of schedule, although it has not yet received funding for the on and off ramps to connect it to the future Tripoli Way bypass of the Albion Park CBD; a priority for our members. 

And we will keep working to progress the Mount Ousley Interchange; arguably the most vital road project for the Illawarra and South Coast.