Last week the Federal Government reviewed its Budget and it caused a bit of a stir.
Every business should have a budget. Like the Government did, it is important for a business to regularly track how it is going against that budget. Depending upon the nature and size of the business, the review should be at least monthly with a major review every six or 12 months.
The Mid-year Economic and Fiscal Outlook was the Government’s six monthly Budget review. (You can give your review a long, fancy name if you wish.) Faced with a slowing domestic economy and falling revenues, the Government announced measures to achieve its goal of a budget surplus (where revenue is greater than expenditure). Businesses should also see if they are on target and look at how they can increase revenues and cut costs when reviewing their budget.
The controversy surrounding the Federal Budget review was that the biggest contribution to the savings announced is getting large businesses to pay their tax earlier through phased “pay as you go” instalments, from the start of 2014. There were a number of other revenue changes and also expenditure cuts including reducing the baby bonus and changing the calculation of private health insurance rebates.
The Budget review also gives a useful update on economic forecasts. The economy is now expected to grow by 3 per cent in 2012-13 and 2013-14, 0.25 per cent weaker than predicted in the May budget. The non-farm economy is expected to grow unchanged in 2012-13, farm output is expected to contract. Household consumption growth is expected to stay unchanged at 3 per cent over the next two years. Employment is expected to grow by 0.25 per cent less than forecast in May. Unemployment is still expected to be 5.5%, which is unchanged because it was expected that less people will be participating in the labour market. Inflation and wages growth are expected also expected to be weaker.
Greg Taylor is Deputy CEO and Chief Financial Officer for the Hunter-based Greater Building Society. This blog also appeared in the Newcastle Post October 31.