Focus on family futures

With Treasury and the RBA still concerned about an inflation breakout and most economists talking up the chances of two more rate rises in the next financial year, it is no surprise that the attacks on middle class welfare are of concern to many small business owners. However, it is unlikely to have a dramatic impact on most small firms that are safely under the proposed thresholds.

Fortunately, Gary Morgan informs us that consumer confidence is still at relatively high long-term levels and is going up, not down overall. Until we have an indication of the compensation packages from Penny Wong and Greg Combet we will not know whether household savings rates for those below the middle class threshold will continue to threaten retail and consumer sales in the coming year.

Six out of 10 small business owners currently have a household income below the $150,000 cut off point where dependent partner changes will have little effect, leaving around 200,000 smart company households in the “forgotten families” list of Tony Abbott.

It is clear that big business wants the benefits of compensation for any great new taxes but feels no need to promote the interests of small business that not only will have to create half the new jobs that Wayne Swan is proposing to create but also 80% of the retail customers that are needed to convince Gerry Harvey that his franchise is still cutting the mustard.

Swan freezes the income threshold for Family Tax Benefit B so that small business families lose the benefit as the income of the principal breadwinner tops $150,000. Thousands more small business families will have their future benefits cut back as their annual incomes go over the top of the thresholds – mostly around $100,000 – but varying with the number of children and their age.

The Government believes that 31,000 families will lose Family Tax Benefit A in the first year of the freeze, which implies that up to 70,000 families could lose their benefits by the end of year two.

Under Swan’s plan to cut $2 billion from future family payments, the budget also freezes the upper thresholds for benefits at the top end for two years, so that as incomes rise, parents on higher incomes will lose benefits faster.

This will lead to cuts for 1.9 million families on benefit A and 1.6 million on benefit B of around $20 per child in year one, rising to $69 per child in year three over and above the cut back of the end-of-year supplements paid to all recipients of both benefits, which began life as the $600 ”cash splash” offered by John Howard to families at the 2004 election.

Expect to see a significant decline in top end retailing, imports and manufacturing clients and real concerns about the Government’s intention to compensate the big at the expense of small enterprise when it negotiates the July 1, 2012 impacts of carbon taxes, etc.

We are already seeing signs of equity market volatility, commodity prices falling, good stocks continuing their super high risk role and major retailers finding store traffic down and discounting going up.

Economists and those on incomes above $200k want more cuts and believe that there has not been enough pain for those on welfare and in the household sector. The media is taking up the risk of a downturn in China and India as a call for more curbs on current expenditures and Joe Hockey promises more substantial cuts in the public service and government expenditure, but we will have to wait for an election to get the details.

All of this means that smart companies would be wise to call an immediate team meeting with their business advisors, accountants and family members to review forward cashflow plans for the next two years. If the bulk of current customers are high-income households who are going to be saving and coping with significant risks of a couple of mortgage belt rate rises, revenue projections need to be curbed.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.