December’s Mid-Year Economic and Fiscal Outlook (MYEFO) brought welcome news for small business owners. The era of white-knuckling our way through economic headwinds might soon be over.
The MYEFO is an annual financial health check for Australia. It provides a snapshot of the nation’s economic status before the May budget and hints at what we can expect for the year (or years) ahead.
Of course, nobody can predict with 100% certainty how economic winds will change. Still, we hope that recapping these federal budget updates helps small business owners make more informed decisions.
So, let’s look at the 2023-24 MYEFO highlights and unpack how it might impact the cost of setting up a company and running a small business.
Budget management and your business
The 2023-24 MYEFO focuses on responsible economic management. The Government hopes this approach will help reduce inflation and ease cost-of-living pressures, which are significant concerns for the Australian economy.
If all goes to plan, the net effect will be a deficit of just $1.1bn in 2024 and the first surplus in 15 years on the horizon. That sounds like a lot, but it’s almost nothing compared to the $145bn deficit of a decade ago.
A stable economy, with reduced deficits and debts, suggests a favourable environment for starting and scaling a small business. Although the cost of setting up a company will remain high until inflation is under control, the returns on that investment could arrive sooner.
What it means for small businesses in 2024: Review your financial strategies and consider investments or expansions if the economy stabilises as planned.
Cost-of-living relief and consumer spending
Cost-of-living relief in the form of energy bill reductions, cheaper medicines and affordable childcare measures are on the cards. While these initiatives are geared towards helping households, they could indirectly benefit small businesses.
There is passing mention of possible energy rebates for small businesses, but we’re not entirely sure how this will play out.
What it means for small businesses in 2024: When inflation comes down and disposable income increases, we could see a spending boost. Adapt and refine your marketing strategy to ensure your business is top of mind when consumers are ready to spend.
Investment in key sectors
The MYEFO update included plans for significant investments in energy, housing and skills. The idea is to rev up the economy while building a foundation for future growth.
If your business operates in these sectors, it could be your chance to tap into new opportunities courtesy of improved infrastructure and skilled labour availability.
What it means for small businesses in 2024: Government investments in sectors like energy, housing, and skills could decrease the cost of setting up a company in growth sectors as new opportunities open up.
Tax law reforms
The MYEFO included tax law reforms targeting foreign investment fees and foreign resident withholding tax. These might not seem exciting unless you’re directly working with international trade, investments or finance.
But if you look closer, the tax reforms reflect an overall tightening of fiscal policy. That could have indirect implications for small businesses, depending on details that are presumably still being ironed out.
What it means for small businesses in 2024: Keep updated with changes in tax laws and consider consulting a financial advisor to ensure compliance and optimal tax planning.
Let’s look at the bigger picture
Overall, the 2023-24 MYEFO reflects a Government keen on economic stability, cost-of-living relief and targeted investments in key sectors. Although we can’t see much in the way of direct impacts on small businesses, federal budgets always have a flow-on effect.
For example, the overall economic environment ushered in by these policies could influence small business operations and opportunities. If the Government’s wish for a budget surplus comes true, it could be a boon for small businesses.
How to navigate the year(s) ahead
The unemployment rate is at historic lows. Job creation is skyrocketing. Wages are growing, although the benefit is still dampened by inflation.
All said and done, the Government still expects moderate economic growth in the near term, followed by a recovery later this decade powered by real income growth and household consumption.
In light of all this federal budget excitement, small business owners should assess their options for the coming years.
We recommend keeping an eye on consumer spending, inflation rates, Government investments and real wage growth. There could be a sweet spot where the cost of setting up a company falls and the rate of return increases.
If (hopefully when) that happens, Registry Australia is here to help you launch your big idea. From business name registration and renewal, setting up a company and ABN activation, to providing top-notch web hosting and .au domain names, we help small businesses start, scale and succeed.
