Federal Politics

Centrepiece of Tony Abbott's last budget fails to deliver promised economic 'turbo-boost'

The small business package central to Tony Abbott's final budget does not seem to have delivered the promised turbocharge to Australia's economy.

The so-called "Tony's Tradies'' package, which is set to cost the budget $5.5 billion over four years, was designed to provide a platform for the Abbott government's re-election plans. 

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It included a cut in the small business tax rate of 1.5 per cent, and the ability for companies with revenue under $2 million to claim an unlimited number of tax deductions for items that cost less than $20,000 each.

Former Treasurer Joe Hockey said on budget night last year that the policy would boost the economy and create jobs.

"Cars and vans, kitchens or machinery … anything under $20,000 is immediately 100 per cent tax deductible from tonight," he told small business owners.

Alan Tudge, then-Parliamentary Secretary to the Prime Minister, said it would "turbo-boost" the small business sector.

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But Bureau of Statistics data do not show a permanent lift in retail spending since that time.

Economist Saul Eslake says the best one can say about the package is it may have contributed to a boost in retail sales and car sales in the month or two after the budget, but that boost has not been sustained.

ABS data show a sharp jump in sales of electrical and electronic goods in the month after the budget - sales had grown by just 0.2 per cent in April and May, before jumping 2.9 per cent in June - before falling again in July by 2.9 per cent.

Hardware building and garden supplies sales also jumped for a month - after growing by 0.4 per cent in April and 1.3 per cent in May, they jumped by 3.7 per cent in June - before falling by 2.1 per cent in July.

Other recreational goods were more volatile. They had fallen by 3.5 per cent in April and risen 0.5 per cent in May, before jumping by 3.2 per cent in June - and then falling by 4.4 per cent in July.

"It's possible that an interpretation of those numbers could be that the budget measures did spur a brief spike in expenditures that plausibly could have been eligible for the budget measures," Mr Eslake said.

"But it's hard to find evidence that there has been a sustained increase in business investment since then," he said.

Data shows motor vehicle sales rose by 3.8 per cent in June - after having fallen by 1.4 per cent in April, and by 1.5 per cent in May - before falling again in July and August. 

Commsec chief economist Craig James said it was "very clear" there was a pick-up in spending after the budget, but the budget coincided with an interest rate cut from the Reserve Bank in May, and improved consumer conditions generally.

He said the Commonwealth Bank business sales indicator - which tracks the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities - jumped by 1.9 per cent in May last year, the biggest trend increase in three years.

But by February this year it had fallen below the decade average of 0.3 per cent, the slowest monthly growth for over three years, data shows.

Assistant Treasurer Kelly O'Dwyer says there have been over 125,500 small businesses claims against the instant asset write-off since the budget, totalling nearly $547.9 million.

She says this is more than this time last year, when there had only been 96,800 small business claims, totalling $322 million.

Ms O'Dwyer says at this stage in the lodgement period there is "nothing to suggest that the final revenue cost will exceed the Budget estimate."

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