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Stimulus supports property industry – but will it be enough?

The property and building industry has welcomed the Federal Government’s $17.6 billion economic stimulus package in response to the coronavirus outbreak, but some say there will still be significant challenges ahead for the sector and the measures may not be enough as the crisis drags on.

Prime Minister Scott Morrison announced the package this week, which includes measures targeted to sustain cash flow in small to medium-sized businesses, boost business investment, and support employment of apprentices and trainees.

Property Council of Australia Chief Executive Ken Morrison said the package was substantial and would have a significant impact, but there would still be tough times ahead for the property industry, which employs 1.4 million Australians.

“These measures should support confidence for business and consumers and encourage small to medium sized businesses to keep employing and investing during this challenging time,” Mr Morrison said.

“But as governments escalate the public health response, these measures will have their own unavoidable impact on the economy.

“From an economic perspective, the current phase has largely been about our exposure to China. The next phase is likely to be about the impact of an economy that will have gone into partial lockdown.

“While many jobs can be performed from home, you can’t build a construction project from your lounge room.”

The building industry is also backing the stimulus package, saying it will save jobs and support small businesses as they emerge from a downturn.

Housing Industry Association Chief Economist Tim Reardon said the stimulus package would provide essential support for the construction industry, which employs more than 1.1 million people.

“The measures will assist in stimulating household demand and prevent a further slowdown in building activity,” Mr Reardon said.

He also praised the $1.3 billion in Federal Government support for keeping apprentices employed by providing small businesses up to $21,000 per apprentice to subsidise apprentice wages by around 50 per cent.

“Apprentice employment is typically an early casualty during periods of economic downturn and this support for small businesses will ensure that fewer are lost during this cycle,” Mr Readon said.

“The extension of the instant asset write-off scheme to businesses with a turnover of up to $500 million, and to an asset value of up to $150,000, will also assist small businesses in the construction industry.”

Master Builders Australia CEO Denita Wawn also backed the package but warned that as the crisis wears on, the Government may need to step up the stimulus measures to the building industry in the face of delayed delivery of imported goods.

She also encouraged the Government to ensure the construction of government projects currently underway continues and that projects scheduled to commence are not delayed or withdrawn.

“The Government could also bring forward expenditure on existing projects,” she said.

“Accelerating construction of current projects and bringing forward construction of shovel-ready projects, big and small, would provide an immediate strong impetus for building firms to take up tax write off and investment incentive measures.

“Our industry also remains nervous about how protracted the inevitable shortage and delayed delivery of imported building products will be.

“This is a hit to our industry that is looming over the next few months and additional measures and extensions of some of stimulus measures may be required to help the industry weather that storm.”

Cash flow assistance for businesses

The largest part of the package are measures to help small to medium businesses with their cashflow. This measure is said to benefit around 690,000 businesses employing around 7.8 million people.

  • $6.7 billion to Boost Cash Flow for Employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses.
    • The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020. The payment will be tax free. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.
  • $1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees.
    • Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020.
    • Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. (Source: pm.gov.au)

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