October 2022 Federal Budget: The Three Actions Businesses Need To Take From The Budget
October’s Federal Budget revealed several key economic factors which will impact every business in Australia, highlighting the key actions your business needs to take to successfully navigate them in the coming years.
Australia’s annual inflation is forecast to peak at 7.75% in December 2022, before dropping to 3.5% in June 2024 and moderating to 2.5% in 2024-2025. This represents the highest inflation in more than 30 years.
These rates are expected to be more persistent than previously forecast, as increases in electricity and gas prices for retail consumers are expected to directly contribute 0.75% and 1% to inflation in 2022-2023 and 2023-2024 respectively.
In late 2022, electricity prices will increase by an average of 20% for retail consumers and an additional 30% in 2023-2024. Gas prices are forecast to increase by 20% in both 2022-2023 and 2023-2024.
For businesses, the rising costs of electricity and gas combined with the extended forecast of elevated inflation will substantially drive up operational costs. In addition, many commercial rents are pegged to CPI, which will mean quite a substantial increase.
Action 1 – Businesses need to be considering their pricing to customers to ensure they are keeping pace with rising costs. However, businesses also need to potentially forecast for declining sales as consumers seek to control their own costs.
The Government expects to see wages grow by 3.75% in both 2022-2023 and 2023-2024. This marks the swiftest pace of wage growth since the height of the mining investment boom in 2012.
Action 2 – To attract and retain high quality staff and remain ahead of the curve, it is imperative that businesses plan to raise wages in alignment with the growth forecasts at a minimum over the next two years. To win the war for talent, you may have to offer above this forecast which represents an average across all industries.
Provisions Encouraging Employment
Seeking to enable maximum workforce participation, the Government revealed plans to deliver cheaper child care to ease the cost of living for families. Over the four years from 2023-2024, the Government plans to:
- Increase the maximum rate of the Child Care Subsidy (CCS) to 90% (up from the current 85% rate) for families with their first child in care.
- Allow families with multiple children in care aged 5 or under to benefit from the increased CCS rate until 26 weeks after the eldest child leaves care or turns 6 years of age.
- Introduce reforms to the Paid Parental Leave Scheme from 1 July 2023, allowing both parents to share leave entitlements and claim payments for parental leave concurrently. The scheme will be extended by two additional weeks each year until the scheme reaches a full 26 weeks of leave from 1 July 2026.
Action 3 – Work with employees in your team who have families to encourage additional working hours to boost productivity and help stem staff shortages.
Please call or click below to discuss with a Macro Group Team Member if you would like further information.
The Macro Group Team
Published on 10 November 2022