The Mid-year Economic and Fiscal Outlook (MYEFO) forecast report was released by the Treasurer of the Commonwealth of Australia, reevaluating the May budget forecast and costings. The RCSA has analysed the report to deliver some insight on business and operational implications of these forecasts to our members and the broader industry.
Economic Forecast update
On the report, the federal government has reduced the real GDP prediction for the
remainder of the year to 2.75% from an anticipated 3% growth that was estimated in May.
Unemployment however is predicted to remain at 5% through to 2022. Labour market
participation is predicted to remain at 65.5% with exports estimated to increase by 3% in
the remained of the year and is projected to increase by 3.5% in 2019-20.
Despite, the downgrade in the real GDP growth projection for the next six months, Real GDP growth is anticipated to increase by 3% in the next fiscal year. Furthermore unemployment is expected to remain at 5% indicating a tight job market for the next four years. The EOFY notes that the decrease in the unemployment rate can be attributed to an increase in employment exceeding workforce participation rate.
Generally speaking, a tight job market is expected to benefit recruiters as the cost of in-
house recruitment increase due to high labour demand without a corresponding increase to labour supply (labour market participation). Since, external recruitment services are
commercially efficient in undertaking recruitment search and placement activities, we
expect growth in the recruitment sector.
The reduction in business tax for small and medium enterprise is expected to reduce tax
burden on SMEs by $3.2 Billion. The tax cuts amounts to $.3.2 billion in tax relief to SMEs over the forward estimate period. Strong presence of SMEs in the recruitment sector means that the small business tax reduction is favourable to the industry at large.
Pension payments are estimated to be reduced by $3.5 billion due to the reduction in the
number of eligible recipients through tightening of the pension asset test. Pension payments will be $3.5bn lower than expected with the tightening of the assets test cutting the numbers of eligible recipients. The reduction in pension recipients Is likely to cause a decline in voluntary early-retirements.
In the May-2018 budget forecast, the government expected 88,000 pensioners to benefit
from the increase to the pensioner work bonus scheduled to commence in July this year.
Incentivised by tightening of the asset tests and the simultaneous increase to the pensioner work bonus, retired Austral