MYEFO 2018-19 RCSA Analysis
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.
Fiscal Update 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 Australians may also seek additional casual and part-time work, paving opportunity for the recruitment and staffing industry.
Policy Initiatives Migration
Working Holiday Makers will be given the opportunity to stay and undertake regional work for an additional year which is expected to deliver an extra $145 million next year. The staffing industry is expected to benefit from extended stays by backpackers.
Extended visas will improve staff retention and will also improve efficiency in sourcing of on-hire workers. This is especially the case with respect to the agriculture sector which is highly dependent on seasonal work from foreign workers in remote and regional areas.
The government seeks to make regional Australia more appealing to migrants. The government, whilst expanding the use of Designated Area Migration Agreements will be creating a Regional Migration Hub to commence outreach activities to help regional employers’ access skilled migrant workers. Furthermore an extra $5 million will be allocated to tourism Australia to promote Australia as a destination to working holiday makers.
$12.9 million over three years from 2018-19 to attract skilled migrants to Australia. The GTI will allocate up to 5,000 places drawn from the non-nominated and non-sponsored skilled cohort of the annual migration program Pacific Labour and Seasonal Worker program that currently enables citizens of Kiribati,
Nauru, Samoa, Solomon Islands, Tuvalu and Vanuatu to work in low and semi-skilled roles in remote and regional Australia for up to 3 years will be expanded progressively to all Pacific Island countries and Timor Leste.
These policy initiative are considerably favourable to our industry, as we have been lobbying for better social dialogue and government assistance to improve regional skilled migration to support regional supply chains and services.
Furthermore, the government’s initiative to improve VET sector and extend the Adult Australian Apprentices Incentive to apprentices aged over 21 will be greatly beneficial to the industry. The recruitment and staffing industries have a strong presence in these markets.
This policy initiative will improve opportunities for young Australians to be able to differentiate their talent and achieve trade level skills whilst also providing opportunities to recruiters who place them.