lition government played cat and mouse on tax policies and budget repair. The Coalition government is now very much reliant on the popularity of Malcolm Turnbull if it is to win the election because the much anticipated budget is not an election winner. While Turnbull continues to be more popular that opposition leader, Bill Shorten, past elections prove you don’t have to be cute and cuddly to win one. Think Tony Abbott. Turnbull and his treasurer, Scott Morrison, have been shackled by back benchers and former ministers who have opposed most genuine reform measures, nervously assessing their re-election prospects ahead of the best decisions for the country. The timing of the forthcoming election is as much about Turnbull stamping his authority on the Coalition party room as it is about defeating Labor to retain government. The problem for Turnbull, however, is that the federal budget may well be more deadweight than powerpack for the Coalition because it was too cautious, a financial plan from a government still spooked by the reaction to treasurer Joe Hockey’s 2014 budget. While the budget has been accepted by most industry groups with relatively positive comments, voters may well be very concerned about what is essentially a treading water budget because of what changes might lie ahead. The Coalition government has shed a lot of goodwill and confidence allowing the speculation around major changes to negative gearing, capital gains tax, an increase in the GST and even a “where did that come from” proposal to allow the states and territories to raise their own income taxes. The lead up to the budget was not a period that provided for sensible debate on revenue options and the shared responsibilities of the federal government with its state and territory counterparts and it has left voters confused and cynical. Most voters will believe this budget was devised to get the Coalition government over an election hurdle so that it could then revisit some of those tax changes more comfortably. Certainly, the optimistic foundations on which the budget has been constructed are arguably immediately at issue given economic analysis by the Reserve Bank prompted another historic interest rate cut in a bid to encourage flagging growth figures and generally weak private investment. The Retail Council, which represents most of Australia’s largest retailers, said there was little in the federal budget to spook consumers and business and both could be buoyed by a commitment to set a clear path to long-term growth. Peter Birtles, Retail Council chairman, said the budget provided few surprises for households and included additional business tax measures designed to support greater investment, job creation, drive innovation and boost productivity. “Personal income tax cuts and company tax cuts for small and medium businesses should help business conditions and stimulate economic activity,” Birtles said. “We are encouraged by the government’s commitment to reduce the company tax rate for all businesses. “However, we are disappointed that these measures will take a decade to implement, particularly as those companies that must wait the longest are the very companies that employ a high proportion of the workforce and make a significant contribution to economic output. “Furthermore it delays the flow-on benefits delivered to Australian households who would also benefit from a reduction in the company tax rate, primarily through higher real wages and increased employment,” Birtles said. The Retail Council is encouraged by the continued commitment of the government to “take careful and necessary steps” to move the budget to a more sustainable path. “The government must now continue to clearly communicate the tax and benefit changes to ensure the budget does not cause any crimping of activity across the economy.” Birtles said the 2016-17 federal budget has delivered, in-part, on the Retail Council’s key budget focus areas to lower company taxes for all businesses and drive the deregulation agenda to enhance competition. He said it had also confirmed the government’s commitment to deliver the zero GST rate on all imported goods and services. “As a sector which employs more than 1.25 million Australians and contributes around 4.5 per cent to GDP, the Retail Council supports measures that will foster a more sustainable and efficient use of resources, productivity improvements, increased workforce participation and an overall higher rate of economic growth,” Birtles said. The Australian Retailers Association (ARA), also welcomed the federal budget’s objectives to bring spending under control while announcing company tax cuts for small to medium business and personal tax cuts for consumers. Russell Zimmerman, ARA executive director, said federal government was to be commended on “making a path to reduce spending while supporting consumer and business confidence in a soft confidence pre-election environment”. “Introducing new measures to support business and delivering stimulus to the hip pocket on top of the Reserve Bank of Australia interest rate cut will be just what the doctor ordered for retail,” Zimmerman said. “The ARA is pleased to see corporate tax cuts, which will help small to medium businesses and the millions of people they employ. “On top of this effort, the work to offset bracket creep through personal tax threshold changes will be a boost for consumer confidence and spending. “While tax cuts for small and medium businesses are welcome, whoever wins the election needs to cut company tax across the board to make Australia more attractive to international and local investment. “There is no question that Australia’s company tax rates are excessive by international standards,” Zimmerman said. “The retail sector has seen a slow start to the calendar year with a lack of confidence triggered by the global environment and the pending federal election. “The ARA and the retail industry have been looking to both the government and opposition to put more money back in people’s pockets while remaining economically responsible. “Changes to international tax compliance are welcome, along with the government’s commitment to fix GST loopholes such as the Netflix Tax and low value GST compliance on goods under $1000, due to be implemented mid next year. “Superannuation changes should encourage low income earners to build a bigger nest egg while balancing higher income contributions in a responsible way.” Zimmerman said the ARA was pleased with the youth skills and jobs program but was disappointed with proposed excise increases that would particularly affect convenience and grocery stores. “What we need to see now is every effort made to strengthen our tax system to build consumer confidence with a clear long-term plan from government and opposition following the election to support consumers and businesses alike,” Zimmerman said. A long-term plan is certainly needed with the economy far from robust, real unemployment double the published rate of 5.5 per cent and the federal budget deficit running $37.1 billion and with little genuine prospect of falling to a projected $6 billion by 2019/20. The Reserve Bank is sufficiently wary of economic conditions in the immediate future to not rule out a further cut in interest rates and that is without the ever present danger of any global economy shocks as the International Monetary Fund and World Bank downgrade their growth forecasts. While the federal budget may have had many of the right messages, most of the budget initiatives welcomed by industry groups and various commentators will be a long time coming and some are over-rated on their value. While tax cuts are obviously the prevailing catchcry for industry groups, Australia has a low tax to GDP ratio and is one of the lowest taxing nations and one of the best in terms of social support. As John Howard found to his detriment, voters decided in the 2007 federal election that the few dollars that might make it to their pockets in tax cuts would be more sensibly spent on ensuring their local hospital and schools were funded to meet the needs of the community. Voters are not as shallow as some may think and the budget was not an election sweetener in real terms. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.