‘Offer incentives for companies to spend’: Qantas and Woodside chairman Richard Goyder

Qantas and Woodside’s Richard Goyder have escalated calls by business groups for incentives to bring forward spending plans.

Richard Goyder. Picture: AAP

Qantas and Woodside chairman Richard Goyder has escalated calls by business groups for the federal government to offer incentives to help large, medium and small companies bring forward spending plans following an alarming 25 per cent fall in non-mining business investment in the June quarter.

Thursday’s budget update revealed Treasury was forecasting new business investment to fall by 12.5 per cent in 2020-21, driven by a significant deterioration in the outlook for non-mining investment, which it predicted to have fallen by 25.5 per cent in the June quarter.

Non-mining business investment is expected to fall a further 21.2 per cent in the current September quarter.

Treasury also warned that business solvencies were at risk in the year ahead with about two-thirds of all businesses reporting decreases in revenue and a number of firms deferring loan repayments and renegotiating lease agreements.

“We have got through this pandemic pretty well but it will be business, with the policy support from government, that will drive the jobs and economic growth to take us forward. It will need business-friendly policies across large, medium and small businesses,’’ Mr Goyder told The Australian.

“Incentives to invest are really important. They can allow businesses to say ‘we are prepared to take a risk now and go ahead with investment earlier than we would have planned with a degree of confidence’.”

The Business Council of Australia has urged the federal government to introduce an investment allowance in its upcoming October budget that would work as a bonus deduction on new investment.

For example a 10 per cent investment allowance would allow companies to deduct an additional 10 per cent of the value of an asset in its first year of use without needing any change to the depreciation schedule of the asset.

The initiative would increase the after-tax return on an investment.

Wesfarmers chief executive Rob Scott told a recent roundtable forum with the BCA hosted by The Australian that investment allowances were some of the most impactful, short-term tax measures that would stimulate business investment.

Flow-on effect to jobs

“And ultimately that will have a flow-on effect to jobs ... The way in which we can be using the tax system as a lever to improve disposable income, create greater confidence in households, therefore stimulate spending, will be important,’’ he said.

At the forum BCA president Tim Reed backed Mr Goyder’s position that an investment allowance scheme would work to bring forward company capital expenditure plans.

“Many of our members have large balance sheets. Many of them, in fact, they are all very committed to investing in Australia. And to have that accelerated investment allowance will change the ROI (return on investment) on those investment cases,’’ he said.

The Grattan Institute has previously argued that policies like accelerated depreciation allowances and investment allowances would promote new investment directly and at far lower cost than cutting the company tax rate.

Under former leader Bill Shorten the Labor opposition proposed introducing an Australian investment guarantee allowing all businesses to immediately deduct 20 per cent off any new eligible asset worth more than $20,000.

The balance was able to be depreciated in line with normal depreciation schedules after the first year.

“Business investment is only going to come back when business confidence returns. Policy devices like investment allowance incentives, asset write-offs and the like have been proven in the past to be crucial drivers of economic activity,’’ said AI Group chief executive Innes Willox.

Drive activity

“What we need more than ever is to drive activity and it is important attention be given to measures that will drive business investment. It stands out like the nose on your face that the government is going to have to look at these.”

One of the nation’s most experienced chairmen and directors, GrainCorp and Energy Australia chairman Graham Bradley, also called on the government to “pull back as fast as possible on policies that crowd out private sector investment” in the October budget.

“This is particularly important in the energy arena where the prospect of taxpayer-subsidised projects are pushing critically important private projects on to the backburner,’’ he said.

BCA chief executive Jennifer Westacott said there was also an opportunity for the federal and state governments to harness the spirit of co-operation that had been developed in the national cabinet through the COVID crisis to finally deal with tax and regulation reform challenges.

Mr Goyder agreed this was also key.

“Continued good relations between federal and state and a clear view collectively of how we live with this virus in a way that supports economic growth and at the same time looks after the health of the community, is fundamental,’’ he said.

He also stressed that flexibility in the industrial relations system would be important.

Business has urged Prime Minister Scott Morrison to extend industrial relations exemptions given to employers to manage the impact of the COVID-19 crisis on their workforce until the new year after this week’s extension of the JobSeeker and JobKeeper subsidies.

“It is essential the agreements that have been in place now which the unions welcomingly agreed to around places of work and hours of work, that those measures remain in place at least until the end of March when the current tranche of government assistance runs out,’’ the AI Group’s Mr Willox said.