TasFarmers Matters - Overspending the hidden risk on farm

Given recent cost and supply chain pressures driven by the Middle East conflict, it was very pleasing to see the government’s $10 billion fuel security package. This, when implemented, will help to improve domestic fuel and fertiliser supply through increased buffers held within the country for future times of crisis.

The permanent extension of the $20,000 instant asset write-off has also been seen as a win for primary producers, supporting them to continue to invest in their business.

TasFarmers is however concerned with the reduction in funding for pests, weeds and regional connectivity. Now more than ever we need to maintain pressure on improving these areas to prevent hard-fought wins from being eroded.

While the government’s aspiration of budget reform through changes to negative gearing and capital gains supporting young people to enter the housing market is admirable, it is a significant broken election promise. 

The announced changes had twice been the cause of failed electoral bids by the Labor Party to win government. 

Some will see this as an unjustified breach of trust, with nothing materially changing in the economic environment since promises against these changes were made at the last election just 12 months ago.

If nothing else, the decision ignores the true root cause of Australia’s housing market dilemma – that supply is not keeping pace with demand.

Many other economists are rightly questioning if this decision is in fact a distraction from the budget’s biggest problem – that government spending is out of control, driving up inflation and reducing business confidence. 

This government’s spending (which is not on national building investments) hasn’t been reined in at all in this budget and places the Reserve Bank in a difficult position when it comes to returning inflation to its target band. 

This is perhaps the hidden risk for agriculture in the budget which producers will need to monitor, manage and work with over the forward estimates if true budget reform on government spending does not occur.

Many of the changes in this week’s budget will take some time to digest, analyse and understand. 

Pleasingly, most of the significant changes will not take effect for 12 months, giving financial specialists the time to devise sound advice and producers time to act. We urge producers to seek professional advice on how best to navigate these changes and also prepare for risks associated with prolonged inflation.