Tough Love – 2014 Budget Divides The Nation

While reaction to the 2014 Federal budget has been varied, for auto dealers, consumer confidence will make all the difference to future trading.

Unless your head has been in the sand, it’s been almost impossible to miss the exponential lead up and rigmarole surrounding the Government’s 2014 Budget. Officially announced on Tuesday May 13, discussions about the nature of the Budget were taking place long before its release – particularly from the Government itself.

Key figures including Treasurer Joe Hockey revealed several of the Government’s planned budget measures, preparing the public for tough, but necessary steps towards budget repair and economic reform.

Whether that’s been achieved or not it is a topic that’s hotly contested, with divided opinion being fed aggressively by the media. Amongst the issues being debated is the Government’s plan to increase spending in national defence and infrastructure, whilst making significant reductions to welfare programs, foreign aid and support of Australian broadcasters ABC and SBS.

Amongst the popular ‘winners’ and ‘losers’ lists being distributed by the media, small-medium businesses, medical research and construction firms are popularly considered the winners. Meanwhile losers include the sick (with increases in doctor’s fees), university students, high income earners, indigenous people, pensioners, local councils and more.

So indeed, a tough budget, but is it fair? And how will it affect automotive dealers?

In a recent statement, AADA Policy Director Michael Deed said,

‘While this is the toughest Federal Budget since 1997, we need a clear path to fiscal sustainability. This latest Budget will help correct the structural problems of unsustainable long-term spending of revenue.’

Indeed, despite its shortfalls, the 2014 Budget will address many of the issues created by extensive Government spending in the past. With a current budget deficit of $49.9 billion, the Government’s focus to tighten spending and gradually wind back debt, for some, is a sensible approach.

The major struggle for auto dealers will be dented consumer confidence exasperated by ‘media and politicians with populist agendas playing to the fear of the people’ according to AADA Chairman Ian Field.

Indeed, low consumer confidence caused by doubts about personal finances and that of the economy, has the potential to impact not only Dealers, but countless other Australian industries. Many economists say that consumer confidence levels are already worryingly low and with the announcement of cuts to welfare, pensions and higher medical prices being constantly berated, further impacts are predicted.

‘If we focused more on educating people on what is necessary and possible, as opposed to preying on people’s fear, there’d be much less conflict’ said Mr Field.

Another Budget aspect that will likely drive lower consumer confidence is the announcement of increased petrol prices. Already a pain point for most Australian motorists, petrol prices will heighten further with the re-introduction of indexation on fuel.

It’s predicted that higher fuel costs will continue to drive trends towards vehicle downsizing along with more importance placed on vehicle fuel consumption and efficiency amongst consumers.

Whilst the specific impact of the Budget on automotive Dealers is still difficult to define, its consequences for automotive manufacturing are more easily noted.

With $900 million forecast to be cut from the Automotive Transformation Scheme (ATS) as part of the Budget, the Federal Chamber of Automotive Industries (FCAI) has said that the Government is undermining the job security of tens of thousands of auto manufacturing and supply chain workers.

The FCAI has expressed deep concern for the over 40,000 workers directly employed by Australia’s automotive sector, along with the more than 100,000 of whom are employed indirectly.

‘The FCAI has repeatedly advised the Government of the serious consequences significant cuts to the ATS could have on the automotive industry in Australia, at what is already a difficult time for manufacturing and supply chain workers,’ FCAI Chief Executive Tony Weber said.

Overall, what is clear is that this year’s approach to the Budget has involved a high-level of fiscal restraint.

While Prime Minister Tony Abbott has described the budget as ‘pain with a purpose’, others are wondering what the point of such severe measures really is.
Ultimately, the merits of the Budget and acceptance by business and the community will be reflected at the next election.

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