Townsville Businesses Consolidating Recent Gains

The PVW Partners’ June 2023 quarterly Business Confidence survey shows that business confidence remains positive, albeit the downward trend from the June 2022 quarter peak has continued. The June 2023 quarter resulted in an index of 1.3, a 1.3 point drop from the previous quarter.

Carl Valentine, PVW Partners Managing Partner said, “The last 5 years have been a period of consistently positive levels of business confidence in Townsville, interrupted only by 2 quarters of COVID-19 induced uncertainty”.

“The survey results over the past year or so are suggesting that Townsville’s business owners and managers are looking more to consolidate the growth achieved over that 5 year period or are otherwise facing constraints to further growth, our currently record low levels of unemployment indicate that labour resources continue to be in short supply in our region”.

Commencing in September 1991, PVW Partners Townsville Business Confidence Survey has now been running for over 30 years and is a unique measure of the levels of confidence of Townsville’s business community.

Carl Valentine observed “the consolidation by businesses or constraints on their growth, as opposed to ongoing growth focused activity, is evidenced by fewer businesses looking to expand their capital investment programs, more businesses indicating they are operating at lower levels of potential capacity and only 16% of businesses looking to increase their employment levels, the lowest level of employment growth recorded since mid-2016”.

With the 2023-24 Federal Budget due to be handed down on 9 May 2023 this survey asked respondents to share their higher-level expectations on what we might see in this Budget.

While there has been much public discussion in recent months on proposed and potential changes to how superannuation is taxed, there has been less recent discussion on the Stage 3 tax cuts that as currently legislated will see an individual’s taxable income between $45,001 to $200,000 taxed at 30% and taxable income above $200,000 taxed at 45% from 1 July 2024.

The survey respondents were fairly evenly split on their expectations around the Stage 3 tax cuts with almost 38% of respondents expecting the current Federal Government to allow the changes to proceed as currently legislated. 35% of respondents are expecting these tax cuts to be reversed in next year’s Federal Budget (just before they are due to take effect) and only 27% expect them to be reversed in this year’s Federal Budget.

Carl Valentine said “with only 38% of respondents expecting the Stage 3 tax cuts to be retained it will be very interesting to see if the Federal Government proceeds as the majority expects with the reversing of the Stage 3 tax cuts in this year or next year’s Federal Budget”.

In terms of high-level expectations around the 2023-24 Federal Budget itself, 1/3^rd of respondents are expecting a “higher taxing, higher spending” style budget. Almost half of respondents expect to see an increase in spending, which is arguably not good news from a future inflationary pressure perspective, but only 44% of respondents expected the additional expenditure to be funded by higher or new taxes. Only a potentially optimistic 13% of respondents are expecting taxes to remain about the same and a decrease in the level of government spending.

Carl Valentine concluded that “for now it would appear our local businesses are looking to consolidate on gains made over the past 5 years or are otherwise facing constraints to continuing their growth journeys”.

The Stage 3 tax cuts for personal income tax are legislated to come into effect from 1 July 2024. This change will see the removal of a marginal tax bracket and lower income tax rates for all taxpayer’s earning more than $45,000 p.a. with an individual’s taxable income between $45,001 to $200,000 taxed at 30 per cent, and taxable income above $200,000 taxed at 45 per cent. What is your expectation in relation to the Federal Government’s potential actions in relation to the Stage 3 tax cuts?

In terms of the Federal Budget to be handed down on 9 May 2023, what are your high-level expectations as to the Government’s fiscal policies for the year ending 30 June 2024?