By the time you read this the state government budget will have been delivered and so I suspect an announcement for a car park at the Rockhampton Hospital.
No doubt jobs, jobs, jobs will be the continuing mantra. And short term fixes will be the hailed solutions to the unemployment crisis.
What I don’t expect to see in the budget is a plan to lift sustained demand for local goods and services to stimulate job growth, especially outside the south east corner, a basic element of economic growth.
As indicated previously this can be done by increasing population growth. It appears though no serious effort is going to be made by either state or federal government to encourage capital city migration to the regions or making the regions more appealing for international migrants.
Another way to lift sustained demand is to encourage more locally owned businesses to advertise.
Many small businesses cut their advertising when the economy gets tighter. Bit like fish when the fish are biting, save your bait when they aren’t.
The fish are still there though, perhaps more selective on what bait to bite at, but they still get hungry and will when ready take what appears the easier option.
Advertising is an allowable business deduction, but what if instead of a deduction advertising could be off-set against the tax payable. Thus if a business made a taxable profit of $30000 after deducting their advertising expenses of $8000, their tax payable would be $9000 ($38000 gross profit – $8000 advertising deduction = $30000 x 30% tax rate). However if the advertising cost was off-set against their tax payable $38000 x 30% = $11400 – $8000 advertising off-set = $3400 tax payable, overall $13600 better off. Good reason to keep dangling the bait?
Why would the government do that though?
Effective advertising will lift sustained demand for goods and services which enhances economic growth.
Restrict the off-set to businesses with a turnover of $2M or less and cap the amount they can deduct from their tax payable.
Being small and lean any increase in demand will arguably result in putting more staff on (more personal income tax collected, less unemployment benefits paid out), possibly leading to expansion in equipment and physical size, thus greater investment in the business (more so than larger businesses that may have capacity to absorb extra growth).
Also arguably the off-set would lead to more small businesses starting and going on to be successful.
The advertising industry would benefit, increasing the tax they would pay and/or number of employees.
Imagine if this tax off-set was restricted to small businesses that only operated in regional/rural areas. Couldn’t that stimulate growth in regional Australia?
Recall the bubble soccer venture that closed due to lack of support earlier this month. How many people knew of this venture? Had the cost of advertising being able to be written off against their tax payable they may have created more awareness and possibly continued on.
How many more small regional businesses will close because government policies aren’t serious about stimulating sustained economic growth in regional Australia?
We need more than band-aids; we need governments who look at the whole country or state and make policies that benefit the whole not just the most populated parts.