What the Federal Budget means for the marketing industry

Latest Budget 2020-2021 welcomed for its business and economic stimulus focus, yet views on how the investment into younger generation employment and skills will impact the marketing and advertising industry are mixed

The Federal Budget’s investment into digitisation, younger job seeker support, hefty tax write-offs and income tax cuts are being generally welcomed as big business boosters for recovering from the COVID-inspired economic crisis.

Yet views on whether the Government’s skills and hiring emphasis will directly benefit the marketing and advertising industry diverge.

Business spending and tax cuts dominate what many have described as one of the most pivotal Federal Government budget in decades, a direct response to the sharply contracting economy and rise in job losses experienced as a consequence of the global COVID-19 pandemic.

One of the headline programs in the 2020-2021 Budget is the $4 billion JobMaker program, designed to encourage businesses to hire young Australians between 16-35 years old. The hiring credit is directly aimed at addressing more than 700,000 younger unemployed Australians currently on JobSeeker, and will see businesses able to claim $200 per week for new employees 18-29 years old and $100 for employees 30-35 years old hired in newly created positions. It’s expected to generate 450,000 positions between now and 2023 and is complemented by additional investment into apprenticeships.    

Another substantial investment designed to bolster business spending is in fresh tax write-offs for goods purchased. From now until 30 June 2022, organisations with up to $5 billion in annual turnover will be able to deduct the full cost of eligible depreciable assets of any value purchased for the business. Costs of improvement to eligible existing assets will also be fully tax deductible. The Government is putting aside $200 billion for the program.  

Businesses of up to $5bn in turnover can also offset losses against previous profits on which tax has been paid to generate a refund in or after 2018-2019. The latter is expected to apply to 1 million companies representing 8.8 million employees.  

There’s also $231m pegged over the next four years for the second tranche of the Women’s Economic Security Package. This includes easing criteria for accessing paid parental leave, $47.9m in funding for the Academy of Enterprising Girls and Women Building Australia, $35.9m to increase the number of co-funded grants to women-founded startups, and $25.1m for a cadetship program encouraging women into STEM industries.    

A further key budget investment impacting business is around digital, with nearly $800 million pegged to invest into Australia’s digital infrastructure. A large chunk is for government projects including digitisation of the government’s business register, worth $419.9m, and expansion of the digital identity system, worth $256.6m.  

However, there are also a number of initiatives to help Australian businesses digitise, such as a $24.7 million package to support SMEs transitioning to the digital economy and boosting business access to the 5G network (the $22.1m 5G Innovation Initiative). The Consumer Data Right is also getting $28.6m to support implementation.  

The funding follows the recently announced $4.5 billion investment into upgrading the National Broadband Network and a further $1.67 billion in funding for cyber security.  

Then there is the $17.8 billion in income tax cuts proposed, aimed at encouraging Australians to spend more, improving business confidence and ensuring more cash flows through the economy. The changes see 11.6 million single working Australians provided tax relief of up to $2745, and families up to $5490, per annum.

Economic stimulus   

Overall reviews of the Budget and whether it can kickstart the business and spending spree it’s hoping to generate are mostly positive. Macquarie Business School Department of Economics professor, Dr Ben Wang, suggested the Budget provides several of the foundations needed to ensure future long-term success of Australia’s economy.  

“Investment in physical and digital infrastructure, spending in education and training to boost human capital, supporting research and manufacturing development, will help the economy to succeed in the long-term,” he commented. “A more efficient and productive economy will grow out of the projected debt hike quicker, potentially leading to a healthier fiscal position in the long-term so that so-called ‘grey rhino’ events can be better dealt with. These events are highly probable and slow evolving, but when they occur have a high impact like climate change and an aging society.”

At a broader level, Mediacom CEO, Willie Pang, welcomed the Government’s various tent peg Budget investments as indirectly benefitting the broader marketing and advertising community. For example, he saw the Government’s overarching willingness to make a long-term investment in re-energising businesses, large and small, as a bonus, and said tax cuts should help the retail sector. This kind of spending should, in turn, improve advertising spend.  

“Measures to reduce income tax at almost every bracket will hopeful see Australian retailers benefit,” Pang commented. “The shift away from bricks-and-mortar ‘only’ business to a stronger blend of digital experiences will continue to accelerate given the ongoing uncertainty but we’re optimistic that advertising spend will grow.”  

IAB Australia CEO, Gai Le Roy, the budget has delivered a range of immediate measures which means so companies should act quickly to take advantage of changes including immediate asset write-offs, incentives for staff hiring, tax loss carry back and importantly for the digital economy, the expansion of the R&D tax incentive.  

"Marketers should be fighting tooth and nail to get at least their fair share of available measures as this sort of short-term boost, if used wisely and strategically, can drive an increase in market share to ensure longer-term business health," she said.

"The budgets’ income tax cuts and employment incentives should help stimulate consumer spend, but the marketing industry will play an important role in supporting consumer confidence, with consumer likely to be nervous around economic and public health stability."

On a more cautious note, fellow Macquarie Business School Department of Economics professor, David Ormond, said the Budget strategy assumes the huge level of support to spending and livelihoods provided under the JobKeeper and JobSeeker programs during COVID-19 “can be effectively replaced with personal income tax cuts and incentives for businesses to hire and invest”.  

“Time will tell if that is right,” he said.

JobMaker, skills investment and the marketing industry

The Association of Data-driven Marketing and Advertising (ADMA) welcomed the Federal Government’s 2020 budget, seeing it as laying the foundation for a marketing and advertising industry recovery.  

“ADMA is delighted to see the concentration on job creation and training which will have a positive impact on the Marketing and Advertising industries,” its CEO, Andrea Martens, said. “It’s encouraging to see a particular emphasis on women and bringing people into the technology industry. The 50,000 new higher education short courses are an important part of addressing skill shortages across the Australian economy.”   

In addition, the removal of Fringe Benefits Tax on internal training will encourage marketing and advertising businesses to further upskill their existing teams, Martens continued.  

“Coupled with this, the announcement of $240m to support female cadetships and apprenticeships in science, technology, engineering and mathematics will go some way to address the under-representation of women in data positions,” she said.  

The Federal Government’s $4.26 million commitment to rolling out a new mental health program for small business owners, also closely aligned with ADMA’s commitment to addressing this issue through its reseller partnership with Thrive Global announced last week, Martens added.   

Yet other responses on the jobs focus specifically on younger generations were less complementary. Shortlyster co-founder, Carl Hartmann, said while JobMaker and the $1.2 billion investment into apprenticeships and training are strong initiatives to boost employment, neither holistically address employment with thousands of Australian white collar workers looking for work who could be utilised more effectively now to help further stimulate the economy. He numbered marketing professionals as one of the key professional categories losing out here.  

“The JobMaker Hiring Credit will be paid at a rate too low to seriously help any business pay the wage of a skilled worker, of which there is high demand for amongst small to medium businesses and this ranges from everything from tech engineers, accountants, marketers, IT and business professionals,” he said. “If the government helped subsidise for a period of time new full or part-time wages, we could get more people back into roles and keep significant intelligence within Australia.”  

According to Hartmann, Shortlyster’s Australian National Talent Registry found hundreds of white collar skilled applicants per advertised role. “This reinforces the fact that this is a group we need to be helping back into work not just tradespeople and manufacturing,” he said.  

“To get Australians back to work we need to get more creative in how we view people’s skill sets. The JobTrainer package announced earlier this year is a step in the right direction for helping upskill Australians, but we need more investment in the learning and development space for programs to help job seekers transfer their skills into new industries. Helping employers identify broader skill sets that can be applied to different roles.

“The job market is down, but the reality is that there are still a lot of businesses operating and are very active. When they are hiring, they need to be able to screen applications for transferable skill sets and make the right hires quickly.”

For his part, Macquarie Business School's Ormond saw new investment policies providing more stimulus for companies and marketing professionals than the new hiring policies. As he noted, the subsidy is focused on new jobs and youth, with the new hire required to have been on a government assistance program during the past three months. However, some of these would be well-skilled and potentially relevant to the marketing sector.

"There are also a range of other incentives for training of current staff, etc, which will be helpful to any company but bespoke in their magnitude," he told CMO.

"The key issue is whether firms facing low current demand for their products for their customers will be willing to undertake new hires and/or investment regardless of these incentives. It will vary by company, depending on its access to financing, how it sees itself in terms of market positioning within its industry, and what it sees as the medium term outlook for customer demand. There is likely to be considerable heterogeneity in any industry in this respect, including marketing."

Le Roy said we’ve seen many mid-level and senior employees leave and she is concerned about the ensuing skew towards very young workers supported by the Budget. 

"It is important the younger generation enter the workforce as soon as possible to avoid long term unemployment, but as an industry we need to develop the resources and support for these younger workers.  We also need to actively develop opportunities for more experienced workers who are an important resource for Australia," she said. 

Accelerating digitisation  

More consistently welcomed are the Government’s digital investments and focus. Australian ICT body, the AIIA, praised the $800 million in Budget funding in 2020-2021 to support digital capability. Its CEO, Ron Gauci, saw this helping the country’s digital capability to “take a leap forward” and said many were recommendations the AIIA had been making as ways to help recover from the COVID-19 induced economic crisis.  

“Through this government investment, Australian businesses will benefit for years to come,” he stated. “Looking beyond traditional infrastructure products and looking towards ‘click-ready’ projects will support the Australian economic recovery from the COVID-19 induced recession.  

“This will bring great economic benefits to the Australian economy. It will boost the digital capabilities of businesses across the country and bring greater efficiencies and productivity benefits to the way government works. We’ll see this through the range of products and the services provided to the community.”  

Likewise, the Australian Computer Society welcomed investment into skilling up women in STEM careers as well as 50,000 new higher education short courses, seeing both as further support for ICT development.  

“Along with the measures announced in last week’s advanced manufacturing and Digital Business plans, the budget lays firm foundations for a tech led recovery,” ACS CEO, Andrew Johnson, said.    

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, follow our regular updates via CMO Australia's Linkedin company page, or join us on Facebook: https://www.facebook.com/CMOAustralia.

 

 

 

 

 

 

 

 

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