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AFCA review of the federal budget

It’s been a big few weeks and months for AFCA members. Weather, politics and interest rate rises seem to be some of the biggest challenges facing our industry. Flooding has led to forest access issues, and even closures, which in turn is leading to lost income and financial challenges in some areas. AFCA is engaging well with state departments and is reaching out to determine immediate member needs.

The Federal Labor Government last week announced what it calls a sensible ‘budget for the times’. The Hon. Dr Jim Chalmers delivered the first Labor Government budget in year as it attempts to curtail the alarming rise in inflation and suppress unnecessary spending in order to take some of the heat out of the economy.

For Small to Medium sized Enterprises (SMEs), such as our members, this will likely lead to a sharp but temporary increase in interest rates, to pull into line a rapidly increasing rate of inflation. This was backed by the RBAs decision this week to increase the cash rate by a further 25 basis points or .25%. The Australian Bureau of Statistics has reported an increase in CPI by 7.3% over the previous twelve months to September this year and today inflationary figures were revised by the RBA to 8%. What this means for our members is a more accurate reflection of the cost increases that have been experienced, but still not a true reflection of the costs experienced by Forest Contracting Businesses.

This rapid rise in inflation is in part to do with a number of key factors directly linked to:

  1. The rising cost of housing and lack of housing availability and affordability
  2. Supply chain costs, including labour
  3. Energy costs including the cost of diesel, gas and electricity

AFCA along with other industry bodies welcomes the budget as it has a greater forestry industries focus. Details of the key takeaways include:

  • $100 million over 5 years from 2022-23 to establish the Australia-wide National Institute for Forest Products Innovation (NIFPI) to support transformative research and innovation in forest industries.
  • $86.2 million over 5 years from 2022-23 for grants to establish new forestry plantations.
  • $10 million over 4 years from 2022-23 to support the delivery of qualifications, competencies and credentials to meet the training and accreditation needs of forestry and wood products industries.
  • $8.6 million over 3 years from 2024-25 to extend funding for the Regional Forestry Hubs and expand their role to provide extension services from 2022-23.

Further details from the Department of Agriculture, Fisheries and Forestry can be found here.

In addition to the above, there were some further initiatives in the budget that will be of interest to AFCA members:

The Diesel Exhaust Fluid (DEF) Market Security: The government will inject $49.5 million in funding to secure the availability of DEF, also known as AdBlue, in the Australian market. The funding will be available between years 2022-2026 and aims to secure at least 5 weeks of emergency supply of urea, a key ingredient of DEF products and further funding for DEF manufacturing grants within Australian.

The Heavy Vehicle Road User Charge (RUC) is currently 26.4 cents to each litre of diesel used by heavy vehicles as set out in the Fuel Tax Act 2006. The aim of the Heavy Vehicle Road User Charge is to ensure the continual upgrade and maintenance of road infrastructure for the purpose of heavy vehicle haulage. The federal government will increase this to 27.2 cents/litre by 2026. In real terms, this will mean a reduction in the fuel excise rebate claimable. For every increase in the RUC in real terms that means a decrease in your fuel tax credit.

The industry saw record high international fuel prices during June, and now an RUC increase. It will be imperative that these costs are passed on to customers, which in turn will mean higher consumer prices for wood, wood products and packaging/paper. 

AFCA is engaging with a number of transport associations on these budget announcements and will provide updates on how these will be realised. We also encourage members to reach out if you require further information

AFCA also welcomes the Energy Efficiency Grants for Small and Medium Sized Enterprises. AFCA members are already looking to reduce the day-to-day emissions of their operations. The Government will provide $62.6 million over 3 years from 2022–23 to support small to medium enterprises to fund energy efficient equipment upgrades. The funding will support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand. We look forward to working with the Department of Climate Change, Energy, the Environment and Water on the many opportunities for our members as they look to test and hopefully adopt better technologies for the future.

AFCA is ready to engage with government departments over the coming year to ensure its members make the most of the opportunities available to them through the budget initiatives.

 

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