“The $176 Billion Red Tape Burden Is One Australia Can Simply No Longer Afford

“The $176 Billion Red Tape Burden Is One Australia Can Simply No Longer Afford

A daily email by free market think tank the Institute of Public Affairs, providing the latest economic data and policy measures for journalists, commentators and IPA members.

Daily IPA comment, attributable to Cian Hussey, Research Fellow at the Institute of Public Affairs:

“Allowing businesses to reopen and Australians to get back to work must be the priority of both state and federal governments.”

“Unfortunately, much of the damage has already been done. Some businesses have closed permanently, and many jobs have ceased to exist. Re-creating these businesses requires pro-business and pro-jobs policy settings, including a lower business tax rate and the removal of job-destroying red and green tape.”

“Business investment was at lows not seen since the aftermath of the previous recession before the disruption caused by the coronavirus. Higher levels of investment lead to increased productivity, higher wages, and more jobs.”

“Onerous red and green tape is standing in the way of business investment that would boost the Australian economy. The $176 billion red tape burden is one Australia can simply no longer afford.”

Research prepared by IPA Research Fellows Kurt Wallace and Cian Hussey. 

Australia

  • 6,869 confirmed cases and 98 deaths. There are 796 active cases and 5,975 recoveries. 66 cases in hospital, with 27 of those in ICU.
  • The Morrison government has pledged $352 million to a European Commission-led COVID-19 vaccine research fundraiser. This includes money already committed to Australian institutions, such as the Doherty Institute and CSIRO.
  • Business investment will fall by $69 billion this year, according to Deloitte Access Economics.
  • The Victorian government announced a new $491 million tax relief package yesterday.
    • Freeze on a range of fees, charges and levies which were due to be increased in July, including car registration, traffic infringements, court-imposed penalties and permit fees, and the Fire Services Property Levy.
    • Businesses participating in JobKeeper will be exempt from payroll tax and the WorkCover premium on payments to stood down employees.
  • New car sales fell 48.5 per cent in April compared with the same month last year, according to the Federal Chamber of Automotive Industries.

United States

    • Services businesses saw their steepest drop in activity in April since the 2007-09 recession. The Institute for Supply Management’s non-manufacturing index fell from 52.5 in March to 41.8 in April, the lowest reading since March 2009. Data firm IHS Markit’s services index fell from a seasonally-adjusted 39.8 in March to 26.7 in April, the sharpest one-month decline since the survey began in October 2009.

Schools

  • New South Wales – Public and Catholic schools will return to face-to-face classes one day a week (year 12 students will return to as many classes as the school can provide). The Berejiklian government will monitor for two weeks before bringing classes back full-time. Independent schools are making their own decisions.
  • Victoria – Schools open but students who can learn from home must do so until the end of term two on June 29.
  • Queenslad – From May 11 kindergarten, prep and years 1, 11 and 12 return. Remaining students planned to return from May 25.
  • Western Australia – Face-to-face teaching in place for all students, but attendance is optional until May 18.
  • South Australia – Schools reopened and students encouraged to attend.
  • Tasmania – Home-learning still in place, but schools open for parents who are unable to supervise their children.
  • Northern Territory – Returned to classrooms on April 20.
  • ACT – Plan to return during term 2. Primary school children, and year 7 and 12 students will return first.

Estimated layoffs

On April 3, the IPA estimated that 717,000 jobs had been lost due to the shutdown.

  • Assumptions:
    • Major cuts to pubs and clubs, cafes, social clubs, arts and recreation, and hairdressing and beauty.
    • Substantial cuts to cafes and coffee shops, catering services, clothing retail, jewellers, and travel agencies.
    • Moderate cuts to hotels, resorts, motels, and restaurants.
    • 28,000 layoffs at Qantas and Virgin.
    • Based on industry employment numbers from IBISWorld.
  • This is likely to be a very conservative estimate as it doesn’t include many industries indirectly affected. This also doesn’t consider the significant amount of reduced hours across the economy.

Announced stand-downs and layoffs from large companies.

  • This is a running count of announced stand-downs and layoffs and is compiled of companies that have made a public announcement including a specific number of employees let go.

Running total – 129,885

  • Qantas 20,000.
  • Crown 20,000 (Crown estimates it has 4,000 small businesses that depend on it).
  • Myer 10,000.
  • Premier Investments 9,000.
  • Star Entertainment 8,100.
  • Virgin 8,000.
  • ALH Group 8,000.
  • Mosaic Group 6,800.
  • Country Road Group 5,000.
  • Accent Group 4,500.
  • Flight Centre 3,800.
  • Pacific Brands 3,000.
  • Worley 3,000.
  • Michael Hill 2,500.
  • Adairs 1,800.
  • Helloworld 1,575.
  • Uniqlo 1,500.
  • Kathmandu 1,300.
  • Sussan Group 1,300.
  • H&M 1,300.
  • AP Eagers 1,200.
  • Viva Leisure 1,002.
  • Lovista 800.
  • RM William 709.
  • Freedom Furniture 700.
  • Tabcorp 700.
  • Woodside 650.
  • Opera Australia 600.
  • Webjet 440.
  • Kikki.k 440.
  • Foxtel 340.
  • Radio Rentals 300.
  • Carsales.com 250.
  • Colette 210.
  • KPMG 200.
  • Hutchinson Builders 200.
  • Manly Fast Ferry and Captain Cook Cruises 180.
  • Santos 150.
  • Bauer Media 140.
  • Kresta 130.
  • Harris Scarfe 59.

Stimulus measures – updated 6 May

Commonwealth

  • A $40 billion discretionary fund has been set aside under the control of the Finance Minister.

Households ($25 billion)

  • $14.1 billion welfare:
    • Expanded eligibility to income support payments.
    • Additional $550 per fortnight.
  • $1.6 billion welfare expansion to students:
    • Expands the $550 per fortnight payment to students not included under the original plan.
  • $8.8 billion handouts:
    • Two rounds (originally one) of $750 payments to income support recipients.
  • $1.2 billion early superannuation access:
    • Tax-free withdrawal of up to $20,000 in superannuation.
  • Temporary reduction in super drawdown rates:
    • Reduce minimum drawdown rates by 50 per cent for FY19 and FY20.
  • $876 million lower social security deeming rates.

Business ($38.8 billion)

  • $31.9 billion cash flow boost for employers. Total payment between $20,000 and $100,000.
  • Temporary relief for financially distressed businesses:
    • Changes to requirements around insolvency.
  • $700 million increased instant asset write-off:
    • Lifting asset threshold to $150,000 (was $30,000).
    • Businesses eligible with turnover of up to $500 million (previously $50 million).
  • $3.2 billion accelerating depreciation deductions.
  • $1.3 billion wage assistance for apprentices and trainees.
  • $1 billion for affected regions.
    • $110 million will be allocated to creating a new freight assistance mechanism to recommence local seafood exports to China, Japan, Hong Kong, Singapore and the United Arab Emirates.
  • $715 million for airlines and airports:
    • Relief from a range of government taxes and charges.

JobKeeper Scheme

  • The scheme is expected to cost $130 billion across 2019-2020 and 2020-2021.
  • A payment of $1,500 a fortnight (70 per cent of the median income) before tax.
  • Available for up to 6 months.
  • Businesses will be eligible if they:
    • Have experienced a decrease in turnover of at least 30 per cent due to the coronavirus impact. For businesses with a turnover above $1 billion, turnover must have fallen by at least 50 per cent. Charities only need to demonstrate a 15 per cent turnover reduction, regardless of their turnover level.
    • Are not subject to the Major Bank Levy.
  • Available for all full-time, part-time, long-term casuals (at least 12 months) and stood-down employees on a businesses’ books on 1 March that continue to be engaged by the business.
  • Also available to self-employed sole traders.
  • Legal obligation for businesses to maintain employees (i.e. they’ll have to refund the money received for any employee they fire).
  • Payments will be made from May 1 and will be backdated to 30 March.
  • Employees making over $1,500 a fortnight will receive their regular wage, with the jobkeeper payment partially subsidising their wage.
  • Employees who earn less than $1,500 a fortnight will receive the full $1,500 a fortnight.
  • Employees who have been stood down will receive the full $1,500 a fortnight.
  • Employees who have ceased employment, were employed on 1 March, and have subsequently been re-engaged, will receive, at minimum, the full $1,500 a fortnight.

Lending ($125 billion)

  • $20 billion SME loan guarantee.
  • $15 billion from the government for SME lending through the banks.
  • $90 billion from RBA for SME lending through the banks.

$1.1 billion healthcare and vulnerable Australians package, including:

  • $669 million for Medicare support at home (such as telehealth services).
  • $150 million for domestic violence support.
  • $74 million for mental health support.
  • $200 million for charities, community organisations and food relief organisations.

$3 billion childcare package announced:

  • Almost 1 million families will be able to access free childcare.
  • 13,000 childcare providers are eligible and will receive 50 per cent of their pre-crisis (last two weeks of February) fee revenue (up to the Child Care Subsidy hourly rate cap) from the government from Monday 6 April.
  • Means-tested Child Care Subsidy temporarily ceased.
  • In place for six months.

$1.3 billion underwriting of Australia’s 657 private hospitals under an agreement that will open up the 35,000 private hospital beds to public patients. The states and commonwealth will split the cost of services provided 50-50, and the $1.3 billion provides an initial payment on an uncapped “viability guarantee” to offset lost revenue from cancelled elective surgeries.

The foreign ownership threshold that triggers government scrutiny of investment through the Foreign Investment Review Board will be lowered from $1.2 billion to $0.

$500 million COVID-19 Export Capital Facility will provide eligible small and medium exporters (including tourism providers and small private colleges) with loans between $250,000 and $50 million.

$165 million to ensure that a minimum network of domestic flights continue to operate over the next eight weeks. Qantas and Virgin will continue to operate flights between “critical metropolitan and regional” centres under the deal.

Media companies support package announced, including:

  • Waiving television and radio spectrum fees for 12 months worth $41 million.
  • An additional $13.4 million to repurpose the regional and small publishers jobs and innovation package into the new, Public Interest News Gathering program worth a total of $50 million.
  • Suspending Australian drama, children’s and documentary content quotas for free-to-air and subscription television the remainder of 2020. The overall 55 per cent Australian content quota remains, however.
  • A new mandatory code of conduct has been announced to provide relief to commercial tenants. Under the code:
    • Tenants eligible for relief are those who are eligible for JobKeeper (i.e. have seen a 30% reduction in turnover) and have a turnover under $50 million.
    • Their landlords must provide a reduction in rents at least equal to the reduction in turnover. This reduction will be 50% rent waivers and 50% rent deferrals. For deferred payments, tenants will have at a minimum 24 months to pay the outstanding rent.
    • If landlords fail to negotiate they will lose access to concessions such as land tax or council rates relief or loan repayment holidays offered by banks. In this instance, tenants will be able to break their lease.

More details: https://treasury.gov.au/sites/default/files/2020-03/Overview-Economic_Response_to_the_Coronavirus_0.pdf

Victoria

  • Three-stage, $1.7 billion stimulus announced.
  • $550 million payroll tax refund for 24,000 SMEs with a payroll of less than $3 million (refunds available from Friday, March 27).
  • $500 million fund for hardship payments, small grants and tailored support.
  • $600 million for a range of measures, including waiving liquor licence fees for 12,500 venues.
  • $1,600 fines for those breaking social distancing requirements.
  • An additional $1.3 billion spend on Victoria’s health system. The package is estimated to increase the number of ICU beds from 500 to 4,500.
  • $500 million relief package for residential and commercial tenants and landlords.
    • $420 million in lad tax relief. Residential landlords may be eligible for a 25 per cent reduction in land tax if they agree to reduce their tenant’s rent. They can apply to defer the remaining land tax until 31 March 2021.
    • $80 million financial assistance to renters experiencing hardship. The Rent Relief Grant will provide up to $2,000, paid to the landlord, to cover shortfalls in rent for tenants who have reached an agreed rent reduction with their landlord (or lodged a dispute with Consumer Affairs Victoria if one cannot be reached), have less than $5,000 in savings, and still pay at least 30 per cent of their income in rent.
    • Policies are backdated to 29 March 2020.
    • The new laws will also give effect to the six-month ban on evictions with some exceptions, including if tenants damage the property, use it for criminal activity, if serious violence occurs, or if tenants are able to pay rent but wilfully do not.
  • $491 million tax relief package.
    • Freeze on a range of fees, charges and levies which were due to be increased in July, including car registration, traffic infringements, court-imposed penalties and permit fees, and the Fire Services Property Levy.
    • Businesses participating in JobKeeper will be exempt from payroll tax and the WorkCover premium on payments to stood down employees.

New South Wales

  • $3.3 billion stimulus package announced.
    • $1 billion Working for NSW fund to create new jobs.
    • $700 million extra funding for NSW Health.
    • $450 million to waive payroll tax for businesses with payroll of up to $10 million for the next three months.
    • $56 million to bring forward payroll tax cuts by raising the threshold limit to $1 million in 2020-21.
    • $80 million to waive a range of fees and charges for small businesses.
    • $250 million to employ additional cleaners of public infrastructure.
    • $250 million to bring forward maintenance on public assets.
    • $500 million to bring forward capital works and maintenance.
    • 6 month deferral of gaming taxes for pubs, clubs, hotels and lotteries (with the condition that the money is spent on retaining staff).
    • Rents for commercial tenants with fewer than 20 employees in government-owned properties will be suspended until the end of September.
    • $34 million boost in funding to prevent homelessness.
    • $30 million boost for the Energy Accounts Payments Assistance scheme.
    • $10 million to support charities.
    • $6 million additional funding for Lifeline’s operations in NSW.
  • New $750 million support package aimed at supporting small businesses. It will provide $10,000 grants for up to 75,000 small businesses (NSW has around 710,000 small businesses). To be eligible, businesses have to employ up to 19 people and turnover more than $75,000 a year.
  • NSW will also spend $70 million to fund housing infrastructure in Sydney’s north-west.
  • $50 million to provide free pre-school childcare for the next six months.
  • $80 million to cover the portion of wages of employees of local government childcare centres that isn’t provided by the federal government’s JobKeeper Payment.
  • $440 million package to assist renters and landlords. A 60 day stop on evictions has been introduced. Landlords must negotiate a rent reduction for tenants negatively impacted by COVID-19. This includes tenants whose household income has declined by 25%. Following the 60 day period tenants can only be evicted on the basis of rental arrears if they have failed to meet requirements of reduced rent negotiated in “good faith” with the landlord.

Queensland

  • $4 billion stimulus.
  • $300 million household relief package will give households $200 off their utility bills.
  • $2.5 billion directed towards workers and businesses, including $500 million to assist workers who lose their job or income. Liquor licence fees are being waived, rent relief for businesses who rent premises from the state government, and sole traders and SMEs will receive a $500 rebate on their power bill for the year.
  • $1.2 billion expanding fever clinics, emergency department capacity, acute care services and regional aeromedical services for remote communities.
  • Includes two months worth of payroll tax refunded to SMEs and a payroll tax holiday for the April-June quarter. Large businesses can apply to access this payroll tax holiday if they are impacted by coronavirus.
  • Other measures:
    • $500 million in 12-month, interest-free loans.
    • $27.5 million Immediate Industry Recovery Package to provide relief to affected industries, businesses and workers.
    • $17 million vaccine package.
    • $8 million funding relief for the arts sector.

Western Australia

  • $1 billion economic and health relief package:
    • Power and water disconnections will not occur, and interest will not be charged on deferred payments until 30 September 2020.
    • Interest-free payment arrangements and late payment penalties waived for transfer duty, landholder duty, vehicle licence duty or land tax.
    • One-off $2,500 credit on electricity bills for 95,000 small businesses, available for those that consumer less than 50MWh per annum.
    • Payroll tax will be waived for four months for businesses with a wages bill under $7.5 million a year.
    • Range of licence fees will be waived for small and medium businesses.
  • $607 million stimulus package.
  • $402 million freeze on household fees and charges, including electricity, water, motor vehicle charges, emergency services levy and public transport fares.
  • $114 million to support SMEs.
  • $91 million to double the Energy Assistance Package to $600 for eligible concession card-holders.
  • $1 million payroll tax threshold brought forward to 1 July, 2020.

South Australia

  • $1 billion stimulus/support package announced.
  • $650 million “jobs rescue package”.
  • $350 million stimulus package, all spending no tax relief:
    • Major road and hospital upgrades, tourism upgrades, increased funding for Economic and Business Growth Fund.

Tasmania

  • Total stimulus/support package of $1 billion.
  • $580 million support package includes:
    • $150 million boost to health spending, a freeze on all power, water and electricity prices for homes and small businesses and the waiving of first quarter utility bills for all small businesses.
    • Interest free loans and tax and charges waivers for businesses shut-down or severely impacted.
    • $40 million small business grants program and extension of payroll tax relief for hospitality, tourism, seafood and other impacted companies.
  • $420 million stimulus package:
    • $1 million over next three months to organisations such as Salvation Army, Red Cross to support self-isolated individuals.
    • One off payments of $250 for individuals and up to $1,000 for families who are required to self-isolate.
    • $1 million emergency accomodation support for people who must self-isolate but cannot return to usual residence.
    • $4 million for primary health and mental health sectors.
    • $20 million interest free loans for small businesses in certain sectors with a turnover of less than $5 million.
    • Payroll tax waived for hospitality, tourism and seafood industry businesses. Other businesses must apply for payroll tax waiver.
    • $50 million to fast track maintenance on public buildings.
    • Other small business grants, payroll tax rebates and funds to support training and employment.
  • $3 million package to support the estimated 26,000 temporary visa holders who are stuck in the state.
    • Those who can demonstrate immediate financial hardship will be eligible for a $250 payment per person, or $1,000 for families.
    • Additional funding to non-government organisations to provide additional emergency relief and assistance where required.
    • Where it is safe for visa holders to return to their home country, the government will assist with travel advice and, on a case-by-case basis where there is “genuine financial hardship”, financial support to return home.

Australian Capital Territory

  • $137 million stimulus.
  • $150 rates rebates for every household, $200 rebate for those on utilities concession.
  • Vehicle registration, public transport fares and parking fees frozen.
  • $2,622 credit to commercial rates bill.
  • $750 rebate to small businesses through the next electricity bill.
  • Businesses paying up to $10 million in wages can defer payroll tax for 12 months. “Affected” industries receive a one-off six month waiver.
  • Taxi and rideshare fees waived. Food and liquor license fees waived.
  • $20 million fund for simple infrastructure works on public buildings.
  • $500,000 in arts grant funding brought forward.
  • $7 million for non-government organisations to meet increased demand for social services.

Northern Territory

  • $65 million stimulus:
    • $30 million home improvement scheme.
    • $20 million business improvement grant.
    • $5 million immediate work grant.
    • $5 million structural adjustment package.
    • All regular increases to government fees and charges, including electricity costs, put on hold.
    • Payroll tax exemption for hiring Territory employees extended to 30 June 2021.
  • Additional, $50 million Small Business Survival Fund.

United States

$2 trillion (USD) Stimulus details

  • Direct payments:
    • $1,200 payment for singles and $2,400 for couples.
    • An additional $500 per child under 17.
    • Full payment for those earning up to $75,000. Phased out up to $99,000.
  • Business loans:
    • $500 billion in loans and loan guarantees.
    • Includes:
      • $29 billion for airlines.
      • $17 billion for businesses involved with national security.
      • $456 billion administered through the Federal Reserve emergency lending facilities.
    • Ban on stock buybacks and restrictions on dividends and layoffs for companies receiving loans.
  • Unemployment:
    • An additional $600 a week for four months.
  • Student loans:
    • Suspension of payment without penalty through to 30 September.
  • Retirement plans:
    • Removal of some restrictions and penalties for early withdrawal from retirement funds for those economically impacted.
  • Health:
    • $130 billion on hospitals and health providers.
  • Food stamps:
    • $25 billion on food stamps.
  • State and local governments:
    • $150 billion.
  • Miscellaneous:
    • $31 billion on education.
    • $10.5 billion on defense.
    • $75 million for public television and radio.
    • $75 million for the National Endowment of the Arts.
    • $75 million for the National Endowment of the Humanities.
    • $25 million for the Kennedy Center (performing arts).

United Kingdom

  • £350 billion government-backed loans, grants and tax cuts for companies.
  • £10 billion to pay workers who lose their jobs up to 80% of their wages.
  • VAT (GST equivalent) payments suspended for April-June, a £30 billion tax holiday.
  • Unlimited 12-month, interest free loans for businesses.
  • £7 billion additional welfare support, including increase in universal credit payments.
  • £1 billion support for renters.
  • £9 billion bailout for nearly 4 million self- employed workers announced.
  • £750m in emergency funding for charities.
  • Self-employed will be able to claim up to £2,500 a month over a three-month period.
  • Open to those with trading profits of up to £50,000 a year and those who earn the majority of their income from self-employment.
  • The scheme won’t become available until June, and the chancellor has warned that the self-employed will face an increase in national insurance contributions in the future.
  • Customs duty and import VAT will be waived on specific medical goods coming from outside the EU. The tariffs, which can be up to 12 per cent, are being removed on ventilators, coronavirus testing kits and a range of protective clothing until 21 July 2020.
  • The government will entirely underwrite loans of up to  £50,000 for small businesses under a new bounce-back loan scheme.
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