Federal Budget 2018-19 - R&CA Submission to the Australian Treasury DECEMBER 2017
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Federal Budget 2018-19 R&CA Submission to the Australian Treasury DECEMBER 2017
RESTAURANT & CATERING AUSTRALIA Restaurant & Catering Australia (R&CA) is the national industry association representing the interests of 35,000 restaurants, cafes and catering businesses across Australia. R&CA delivers tangible outcomes to small businesses within the hospitality industry by influencing the policy decisions and regulations that impact the sector’s operating environment. R&CA is committed to ensuring the industry is recognised as one of excellence, professionalism, profitability and sustainability. This includes advocating the broader social and economic contribution of the sector to industry and government stakeholders, as well as highlighting the value of the restaurant experience to the public. Cover images courtesy of Tourism Australia Top left: Visit Victoria (2016) Waitress serves food at Industry Beans, Josie Withers. Bottom left: Tourism Australia (2011) Bondi Icebergs, Bondi Beach, Anson Smart. Top middle: South Australian Tourism Commission (2014), Mocean Cafe, Streaky Bay, SA, Rob Blackburn. Middle: Tourism Australia, NOOSA International Food & Wine Festival 2013, John Montesi. Bottom middle: Tourism Australia (2014) Darwin Waterfront, Darwin, NT, Adrian Brown. Right: Tourism Australia (2014) Bib and Tucker Restaurant, Fremantle, WA, Adrian Brown.
TABLE OF CONTENTS
INTRODUCTION ________________________________________________________________ 1
RECOMMENDATIONS____________________________________________________________ 3
INDUSTRY SNAPSHOT: CAFÉ, RESTAURANT AND CATERING SECTOR ...............................................................5
OVERVIEW OF KEY HOSPITALITY SECTOR TRENDS __________________________________ 6
PROJECTED EMPLOYMENT GROWTH ...............................................................................................................6
Figure 1: Top 20 industry sectors ranked by projected growth to November 2020 (‘000s) _________ 6
CURRENT SKILL SHORTAGES.............................................................................................................................7
Figure 2: Hospitality Businesses’ Difficulty in Filling Job Vacancies Compared to Last Financial Year _ 7
DEMAND AMONGST KEY HOSPITALITY SECTOR OCCUPATIONS.......................................................................8
Figure 3: Employment growth projections by hospitality occupation to May 2022 _______________ 8
DIFFICULTY IN FILLING KEY POSITIONS ............................................................................................................8
Figure 4: Hospitality Businesses’ Difficulty in Filling Key Occupations Over Past 12 Months ________ 9
TREASURY_____________________________________________________________________ 10
Extension of Instant Asset Write-off Program ...............................................................................................10
Superannuation Guarantee............................................................................................................................10
Fringe Benefit Tax (FBT) .................................................................................................................................11
FOREIGN AFFAIRS & TRADE ______________________________________________________ 12
Tourism Australia ...........................................................................................................................................12
National Business Events Fund ......................................................................................................................13
IMMIGRATION AND BORDER PROTECTION _______________________________________ 14
Visa Application Charges ................................................................................................................................14
Working Holiday Maker Visa ..........................................................................................................................14
Figure 5: Total number of Working Holiday (subclass 417) visa applications lodged to
31 December 2016 by month - comparison with previous four financial years _________________ 15
Skilling Australians Fund ................................................................................................................................16
ENVIRONMENT AND ENERGY ___________________________________________________ 18
Cost of Electricity and Gas .............................................................................................................................18
Figure 6: Factors Making the Most Difference in Running a Business Successfully ______________ 19
EDUCATION __________________________________________________________________ 20
VET Student Loan Scheme .............................................................................................................................20
Australian Apprenticeship Support Network Program ..................................................................................21 CONCLUSION _________________________________________________________________ 22 REFERENCES ___________________________________________________________________ 23
INTRODUCTION At present, Australia’s café, restaurant and catering sector generates economic output of $25.6 billion1 a year and employs 610,000 people2 across 43,000 businesses3 in both metropolitan and regional areas. Significantly, 92 per cent of businesses in the café, restaurant and catering sector are small businesses employing 19 people or less.4 The café, restaurant and catering sector is expected to experience the largest employment growth out of any industry subsector, creating an estimated 84,100 new jobs to May 2022.5 R&CA argues that Commonwealth government funding as well as the overarching policy settings must support high performing industry sectors that improve the productivity and employment prospects of the Australian economy. For the café, restaurant and catering sector, it is critically important that the policy environment is structured in such a way that promotes, rather than inhibits growth. In the absence of government policy aimed at maximising this sector’s growth, the full spectrum of economic and employment benefits may not be realised. In the current climate, the biggest challenge facing businesses in the café, restaurant and catering sector is chronic and acute skills shortages, particularly amongst key occupations of cooks, chefs and café and restaurant managers. The increasing demand for skilled labour among hospitality businesses over the coming years will only exacerbate the severity of this problem. As such, R&CA strongly urges the Commonwealth Government to address the chronic skills shortages affecting the tourism and hospitality industries as a priority in the 2018-19 Budget. Anecdotal evidence received from R&CA members indicates that access to skilled workers, both from domestic and international sources, is by and large the most significant issue faced across the industry. R&CA also argues that the policy settings affecting the business operating environment of small businesses must also be a key focus of the 2018-19 Budget. This includes but is not limited to extending the instant asset write off program until at least 30 June 2019, raising the Superannuation Guarantee Threshold to $600 per month ($1800 per quarter) and indexing to CPI, exempting small businesses with an annual turnover less than $2 million from paying FBT entirely under the Small 1 Australian Bureau of Statistics, (ABS), (2017) Retail Trade Data 8501.0. 2 Department of Employment (2017) Employment Projections to May 2022. 3 Australian Bureau of Statistics (ABS) (2017) 8165.0 Counts of Australian Businesses, including Entries and Exits, Jun 2012 to Jun 2016. 4 Ibid. 5 Department of Employment (2017) Employment Projections to May 2022. Page 1
Business Entity concessions and implementing specific measures to reduce the cost of electricity and gas, including no new taxes, levies or charges on energy prices. Finally, the significant funding cuts to Tourism Australia’s budget included as part of the 2017-18 Budget must urgently be reversed. Given the phenomenal growth in the tourism sector expected over the coming years, funding for Tourism Australia and its tourism marketing activities must be increased in real terms over the forward estimates. The value of Australia’s tourism sector can be seen in the fact that $41.2 billion was spent in Australia by more than eight million international visitors for the year ending September 2017.6 To solidify the Commonwealth Government’s commitment to tourism, a $10 million National Business Events Fund should be also be established to maximise the high-yield spend of international business travellers and the flow-on effects to small businesses such as those in the café, restaurant and catering sector. 6 Tourism Research Australia (2017) Results of the International Visitor Survey: Year Ending September 2017, 12 December. Page 2
RECOMMENDATIONS
TREASURY
INSTANT ASSET WRITE OFF PROGRAM
▪ Funding an extension of the instant asset write off program until at least 30 June 2018.
SUPERANNUATION GUARANTEE
▪ Raise the Superannuation Guarantee Threshold to $750 per month ($2,250 per quarter) and
index to CPI.
FRINGE BENEFIT TAX
▪ Small businesses with an annual turnover less than $2 million should be exempt from paying
FBT entirely under the Small Business Entity concessions.
FOREIGN AFFAIRS & TRADE
TOURISM AUSTRALIA
▪ Reverse funding cuts to Tourism Australia from the 2017-18 Federal Budget.
▪ Commit to increased funding for Tourism Australia in real terms over the forward estimates.
NATIONAL BUSINESS EVENTS FUND
▪ Invest $10 million per annum into a National Business Events Fund to attract high-yield
international business events delegates to Australia.
IMMIGRATION
VISA FEES AND CHARGES
▪ Commit to a 50 per cent reduction in the cost of the TSS visa applications for both the short-
term and medium-term streams.
WORKING HOLIDAY MAKER REFORM PACKAGE
▪ Reinstate the Commonwealth Government’s previous commitment to reduce the Working
Holiday Maker visa fee from $440 to $390.
SKILLING AUSTRALIANS FUND
▪ Include Commonwealth Government Funding for the Skilling Australians Fund to reduce the
training levy burden on small businesses hiring foreign workers and to support hospitality
businesses to continue to train Australian workers.
Page 3
▪ Guarantee $1.5 billion investment in Skilling Australians Fund regardless of the amount
generated through the migration program training levy on businesses.
▪ The Government confirm its commitment that refunds will be available for businesses if a TSS
visa application is unsuccessful or if an applicant resigns during the term of the visa after it has
been granted.
ENVIRONMENT AND ENERGY
COST OF ELECTRICITY AND GAS
▪ The 2018-19 Commonwealth Budget include specific measures designed to reduce the cost
of electricity and gas prices.
▪ That no new taxes, levies or charges that increase the cost of electricity or gas are included in
the 2018-19 Budget.
EDUCATION & TRAINING
VET STUDENT LOAN SCHEME
▪ Reinstate the Diploma and Advanced Diploma of Hospitality on the approved course list at
band $10,000 or $15,000 as part of the VET Student Loan scheme.
AUSTRALIAN APPRENTICESHIP SUPPORT NETWORK PROGRAM
▪ Funding for the Australian Apprenticeship Support Network program for industry specific
mentoring should be maintained to extend the life of the program beyond the initial two
years.
Page 4INDUSTRY SNAPSHOT: CAFÉ, RESTAURANT AND CATERING SECTOR
THE SECTOR CONTRIBUTES
$43.9 BILLION TO THE
NATIONAL ECONOMY
TAKEAWAY COMPONENT,
$18.3 BILLION TOURISTS SPENT
$22.3 BILLION ON
RESTAURANT AND
TAKEAWAY MEALS IN
$43.9 Billion 2016-17
THIS ACCOUNTED FOR
16 CENTS OUT OF EVERY
TOURIST DOLLAR.
THE SECTOR
EMPLOYS 610,900 PEOPLE
EXPECTED TO REACH 695,100 BY MAY 2022.
EMPLOYMENT GROWTH IS
43,118 PROJECTED AT 13.8% OR
CAFÉS, RESTAURANTS & 84,100 JOBS BY MAY 2022
CATERING BUSINESSES IN THIS RATE OF GROWTH IS HIGHER
AUSTRALIA THAN ANY OTHER INDUSTRY
92.4% ARE SMALL BUSINESSES SUBSECTOR IN THE AUSTRALIAN
ECONOMY.
Page 5OVERVIEW OF KEY HOSPITALITY SECTOR TRENDS
PROJECTED EMPLOYMENT GROWTH
According to the most recently published figures from the Department of Employment, the cafe,
restaurant and takeaway food subsector is expected to generate an additional 84,100 workers by
May 20227. When expressed in terms of percentage growth, the sector is expected to experience
employment growth of 13.8 per cent.8 Most significantly, the projected growth for the café,
restaurant and takeaway food sector is larger than any other industry subsector. The projected
employment growth associated with the café, restaurant and takeaway food sector vis-à-vis other
industry subsectors is demonstrated in Figure 1 below.
Figure 1: Top 20 industry sectors ranked by projected growth to November 2020 (‘000s)
Source: Department of Employment (2017) Employment Outlook to May 2022.
7 Department of Employment (2016) 2016 Employment Projections, Industry projections to May 2022.
8 Ibid.
Page 6CURRENT SKILL SHORTAGES Nationally, the hospitality industry is currently facing chronic shortages in the supply of both skilled and unskilled labour. Concerningly, the ability of hospitality operators to fill job vacancies within their businesses is also deteriorating as the full extent of these skills shortages is realised. According to R&CA’s 2017 Industry Benchmarking Report, 37.8 per cent of hospitality businesses reported increased difficulty in finding staff during the 2016-17 financial year than during the previous financial year.9 This can be compared to 34.6 per cent of businesses recorded in the 2016 survey and 32.9 per cent in 2015.10 The steadily increasing difficulty experienced by hospitality operators in filling key vacancies within the businesses over the last three financial years is demonstrated in Figure 2 below. Figure 2: Hospitality Businesses’ Difficulty in Filling Job Vacancies Compared to Last Financial Year Figure 2 extracted from Restaurant & Catering Australia 2017 Industry Benchmarking Report, p.20. 9 Restaurant & Catering Australia (2017) 2017 Industry Benchmarking Report. 10 Ibid. Page 7
DEMAND AMONGST KEY HOSPITALITY SECTOR OCCUPATIONS
The Department of Employment’s projections also indicate significant employment growth for key
skilled hospitality occupations. As shown in Figure 3 below, projected growth in the number of cooks,
chefs and café and restaurant managers is expected to reach 10.7 per cent, 12.1 per cent and 18.5
per cent respectively by May 2022.11 Collectively, these three positions are expected to generate an
estimated 28,500 new positions in the next five years.12 R&CA advises that significant levels of
demand amongst hospitality businesses for these skilled occupations will not be met without
significant government intervention and favourable policy settings.
Figure 3: Employment growth projections by hospitality occupation to May 2022
Department of Employment Projections
Employment Projected employment
Unit Projected
Occupation level May growth five years to
Code employment level
2017 (‘000) May 2022
May 2022 (‘000)
(‘000) (%)
3514 Cooks 42.2 46.7 4.5 10.7
3513 Chefs 89.5 100.4 10.9 12.1
1411 Cafe and Restaurant 70.6 83.7 13.1 18.5
Managers
Source: Department of Employment (2017) Occupation Projections to May 2022.
DIFFICULTY IN FILLING KEY POSITIONS
The long-standing skills shortages being experienced across the hospitality sector are most acute
amongst the skilled occupations such as cooks, chefs and café and restaurant managers. In 2016-17,
hospitality operators reported that the most difficult position to recruit for was chef, with 70.7 per
cent of businesses reporting that it was either ‘difficult’ or ‘very difficult’ to fill this position (see
Figure 4).13 54.7 per cent of businesses also reported some or extreme difficulty in filling the position
of cook, whilst 52.3 per cent found it difficult or very difficult to fill the position of café and restaurant
manager.14 The increasing difficulty in recruiting for these positions across hospitality businesses is
further testament to the need to ensure that migration channels leading to permanent residency for
11 Ibid.
12 Ibid.
13 Restaurant & Catering Australia (2017) Industry Benchmarking Report.
14 Ibid.
Page 8these occupations remain open. In the absence of including cooks and café and restaurant managers as part of the composition of the Medium and Long-term Strategic Skills List (MLTSSL), R&CA advises that the difficulties in hiring for these positions will be exacerbated significantly. R&CA strongly urges the Commonwealth Government to address these difficulties through targeted investment in skills, training and immigration programs in the 2018-19 Budget. Figure 4: Hospitality Businesses’ Difficulty in Filling Key Occupations Over Past 12 Months Source: R&CA 2017 Benchmarking Report, p.21. Page 9
TREASURY
EXTENSION OF INSTANT ASSET WRITE-OFF PROGRAM
R&CA welcomed the Commonwealth Government’s announcement in the 2017-18 Budget extending
the instant asset write-off program for a further 12 months to 30 June 2018. Under this program,
small businesses with an annual turnover of up to $10 million can immediately deduct eligible assets
each costing less than $20,000. The success of this program can be seen in the fact that almost
300,000 Australian small businesses have claimed the instant asset write-off according to 2015-16
tax office data, with the average amount claimed increasing by $4,065 to $9,000.15 Given the strong
take-up from businesses, R&CA urges the Commonwealth Government to continue its funding for
this program, extending the instant asset write off program until at least 30 June 2019.
Recommendation
▪ Funding an extension of the instant asset write-off program until at least 30 June 2018.
SUPERANNUATION GUARANTEE
The Superannuation Guarantee (SG) threshold was established in 1996 at $450 per month at a time
when the minimum wage was $9.19 per hour. However, under the Restaurant Industry Award 2010,
the current SG threshold is $350 per month. Today the minimum wage under this Award is $18.29
per hour (at an introductory level) which is nearly double what it was 1996. Despite this growth, the
SG threshold has remained the same. Based on the growth in the minimum wage over the last two
decades, the SG threshold should be set at approximately $750 per month or $2,250 per quarter.
The failure of the SG threshold to keep up with the persistent increases to the minimum wage over
the last two decades represents a significant imposition on both small and large businesses alike. For
hospitality operators, this represents in an increased in the costs associated with employing staff
without any corresponding increase in productivity to offset this increase. The rising costs involved
in employing staff are reflected in R&CA’s 2017 Industry Benchmarking Report which found that, on
average, 44 per cent of a typical hospitality business’ total expenditure was related to employing staff
15 Minister for Small Business (2017) 300,000 small businesses benefit from instant asset write-off, Media Release, 13 October.
Page 10including staff training and on-costs.16 Given these significant pressures, R&CA recommends that the
SG threshold be raised to $750 per month or $2,250 per quarter and that it be indexed to CPI.
Recommendation
▪ Raise the Superannuation Guarantee Threshold to $750 per month or $2,250 per quarter
and index to CPI.
FRINGE BENEFIT TAX (FBT)
R&CA has long advocated for changes to the Fringe Benefits Tax (FBT) system, recognising the
compliance cost to small businesses is proportionately higher than for large corporations. This
argument has centred on the inequity that exists in the ability of small businesses to employ
strategies to avoid FBT compared to big business. For instance, large, well-resourced corporations
can employ FBT-avoidance strategies such as having boardroom catering or “in-house” meals rather
than ordering meals from a café or restaurant.
The hospitality sector is further affected by the FBT system due to the treatment of restaurant meals
as employee fringe benefits, as opposed to a legitimate form of doing business. R&CA argues that
having meals which are genuinely for business purposes attract FBT unfairly penalises small café and
restaurant businesses. Classifying restaurant meals as a legitimate form of business would also have
the effect of stimulating increased economic activity at restaurants and cafés and further contribute
to jobs growth.
Based on the compliance cost and lack of access to strategies to minimise the burden of FBT, R&CA
argues that small businesses should be exempt entirely from FBT under the Small Business Entity
concessions. Small businesses with a turnover of less than $2 million currently receive concessions
on FBT for car parking; R&CA contends that these concessions should be extended to include all FBT.
Recommendation
▪ Small businesses with an annual turnover less than $2 million should be exempt from paying
FBT entirely under the Small Business Entity concessions.
16 Restaurant & Catering Australia (2017) Industry Benchmarking Report.
Page 11FOREIGN AFFAIRS & TRADE
TOURISM AUSTRALIA
R&CA was disappointed by the Commonwealth Government’s decision in the 2017-18 Federal
Budget to cut funding for Tourism Australia by $35 million over 4 years. By removing funding for
Tourism Australia, the Commonwealth Government is putting the massive economic and
employment growth forecast for the tourism sector at risk. The value of tourism to the Australian
economy can be seen in the fact that in the year ending September 2017, eight million international
visitors spent over $41.2 billion in Australia across a record 268 million nights.17 Spending by Chinese
tourists alone exceeded $10 billion over the same period which represented an increase of 13 per
cent.18 Given the strong performance of the tourism sector and its contribution to the Australian
economy, R&CA urges the Commonwealth Government to reverse funding cuts to Tourism Australia
as part of the 2018-19 Budget.
In addition, R&CA also recommends that the Commonwealth Government restore funding for
Tourism Australia in real terms. Tourism Australia’s current funding levels represent a decline in real
terms since the entity was first established as part of the Government’s Tourism White Paper. R&CA
stresses the importance of restoring funding for Tourism Australia in real terms as part of the next
Commonwealth Budget. R&CA argues that the tourism marketing functions of Tourism Australia are
a critical aspect of ensuring the ongoing economic vitality and prosperity of one of Australia’s most
important industries. The past success of Tourism Australia’s marketing activities can be seen with
the Restaurant Australia campaign which contributed to a 12.6 per cent increase in food and wine
spend by international visitors ($4.7 billion in total expenditure) as well as a 22 per cent increase in
the consideration of Australia as a holiday destination with great food, wine and local cuisine.19
Recommendation
▪ Reverse funding cuts to Tourism Australia from the 2017-18 Federal Budget.
▪ Commit to increased funding for Tourism Australia in real terms over the forward estimates.
17 Australian Government, Media Release (2017) Minister for Trade, Tourism and Investment, Tourism records smashed, 12 December.
18 Ibid.
19 Tourism Australia (2015) Restaurant Australia Results
Page 12NATIONAL BUSINESS EVENTS FUND
R&CA argues that a key component of the 2018-19 Commonwealth Budget in relation to the Trade,
Tourism and Investment portfolio is the establishment of a $10 million National Business Events
Fund. The influx of international business travellers has significant economic flow-on benefits for
numerous labour-intensive service sectors, including cafés, restaurants and other hospitality
businesses. Significantly, international business events delegates are high-yield travellers spending,
on average, 21 per cent more than other international visitors throughout their trip and 77 per cent
more per day ($236 per day).20
The economic contribution of international business travellers can also be seen in the fact that one
in five dollars spent by international visitors to Australia is spent by an international visitor attending
some form of business event.21 In 2012, expenditure by international business events delegates
generated an estimated $2.2 billion in GDP and 22,500 jobs.22 R&CA argues that in order to maximise
the economic benefits associated with international business events sector and the subsequent flow-
on effects to small businesses, a National Business Events Fund established with Commonwealth
funding is necessary.
Recommendation
▪ Invest $10 million per annum into a National Business Events Fund to attract high-yield
international business events delegates to Australia.
20 Deloitte Access Economics (2014) Australia’s international business events sector.
21 Ibid.
22 Ibid.
Page 13IMMIGRATION AND BORDER PROTECTION
VISA APPLICATION CHARGES
The hospitality sector is heavily reliant on the skilled migration system to source the skilled labour
required to operate businesses successfully. R&CA believes that the structure of Australia’s skilled
migration system should be designed in such a way that supports those industries expected to
contribute the most to future employment outcomes. In order to achieve this, any proposed changes
to Australia’s skilled migration system should incorporate a meaningful reduction in costs across a
wide number of working visa categories.
The implementation of the Commonwealth’s Government’s Temporary Skills Shortage (TSS) visa as
of March 2018 will result in an increase to visa application charges from the current $1,060 per
primary 457-visa to $1,150 per primary visa for the short-term stream and $2,400 per primary visa
for the medium-term stream. R&CA argues that the cost of the TSS visa to small businesses is
prohibitive and will ultimately negatively affect the ability of cafés and restaurants to source the
skilled labour they need to maintain the viability of their businesses, in the absence of sufficient
numbers of skilled and willing domestic employees. Therefore, R&CA would urge the
Commonwealth Government to commit to a 50 per cent reduction in the cost of the TSS visa in the
2017-19 Budget.
Recommendation
▪ Commit to a 50 per cent reduction in the cost of the TSS visa applications for both the short-
term and medium-term streams.
WORKING HOLIDAY MAKER VISA
R&CA argues that a meaningful reduction in the cost of obtaining a visa is required to support
Australia’s position as an attractive and competitive destination for temporary and long-term visitors.
The effect of cost as an inhibitor to Australia’s competitiveness as a destination for overseas visitors
is perhaps best demonstrated by the current working holiday maker (WHM) visa category. The cost
of the WHM fee has more than doubled over the span of a decade, increasing from $180 in 2005-06
to $440 in 2016-17. These significant fee increases have corresponded to a decline in the number of
applications received for the WHM visa (subclass 417). As demonstrated in Figure 5, there were
Page 14255,722 WHM applications in the 2012-13 financial year which decreased to 200,271 in the 2015-16 financial year. This represents a decline of 55,451 WHM visa applications or 21.7 per cent over this four-year period. Even though the Commonwealth Government outlined a commitment to reduce the cost of the WHM visa by $50 in its 2016 Working Holiday Maker Reform Package, the cost of the WHM visa (subclass 417 and subclass 462) still stands at $440.00.23 R&CA is disappointed that the Commonwealth Government failed to honour this commitment, arguing that the increased cost of the WHM visa has significantly contributed to the overall decline in the total number of applications. The reduction in WHM applications has a negative effect on hospitality businesses, both in terms of WHMs as a labour source, as well as their typically high average spend whilst in the country. It is estimated that WHMs earn $11,854 and spend 86 per cent of that income in Australia. R&CA strongly urges the Commonwealth Government to reverse its policy backflip on the cost of the WHM visa and reinstate its original commitment to reduce the WHM visa fee from $440.00 to $390.00. Figure 5: Total number of Working Holiday (subclass 417) visa applications lodged to 31 December 2016 by month - comparison with previous four financial years Source: Department of Immigration and Border Protection (2016), Working Holiday Maker visa program report, 31 December 2016 23 Department of Immigration and Border Protection (2017) Fees and charges for visas. Page 15
Recommendation
▪ Reinstate the Commonwealth Government’s previous commitment to reduce the WHM visa fee
from $440 to $390.
SKILLING AUSTRALIANS FUND
R&CA has expressed significant concerns regarding the Commonwealth Government’s $1.2 billion
Skilling Australians Fund, originally announced in the 2017-18 Budget. The scheme is funded by the
Government’s reforms to the skilled migration program which requires employers who nominate
foreign workers under the new TSS visa and certain permanent visas to pay a Skilling Australians Fund
(SAF) contribution from March 2018. R&CA believes that the Commonwealth Government’s training
levy will exacerbate the impact of acute skills shortages and act as a handbrake on the economic
growth and development of the tourism and hospitality sectors.
Hospitality businesses already spend, on average, 1.7 per cent of their total expenditure on staff
training 24and the impact of this training levy will significantly affect these businesses’ ability to invest
in their own training programs and therefore their ability to train Australia workers. R&CA argues
that the 2018-19 Budget should contain Commonwealth Government funding for the Skilling
Australians Fund to reduce the burden of the training levy fee on small businesses. In addition, the
Commonwealth Government should guarantee its $1.5 billion investment in the SAF, regardless of
the eventual amount generated through the migration program training levy on businesses. Any
potential shortfall in the $1.5 billion amount should be met with additional Commonwealth funding.
This is particularly relevant given that all but $260 million of the $1.5 billion funding commitment to
the SAF is to be raised through the training levy.
R&CA argues that it is unreasonable to expect businesses of any size to absorb the heavy financial
burden of this training levy, let alone small businesses operating on very low margins and will lead
to the closure of businesses. In the café, restaurant and catering sector, over 92 per cent of businesses
are small businesses employing 19 people or less. Whilst the structure of the training levy
distinguishes between small and large businesses, the upfront and ongoing costs of employing
24 Restaurant & Catering Australia (2017) Industry Benchmarking Report.
Page 16foreign workers will make it almost impossible for small businesses to access the skilled labour they
need and will exacerbate existing skills shortages across the tourism and hospitality industry.
Currently, a small business (turnover of less than $10 million) who wishes to sponsor a chef for a TSS
lasting up to 4 years is required to pay $4,800 upfront towards the SAF levy. This upfront payment is
also required for every sponsored chef a business chooses to employ. If the employee resigns prior
to the end of the visa period for whatever reason, businesses have no redress for the upfront fee
paid. R&CA urges that the Commonwealth Government confirm its commitment to process refunds
for businesses sponsoring a visa holder in the event the visa holder resigns prior to the expiration of
the visa.
Recommendation
▪ Include Commonwealth Government Funding for the Skilling Australians Fund to reduce the
training levy burden on small businesses hiring foreign workers and to support hospitality
businesses to continue to train Australian workers.
▪ Guarantee $1.5 billion investment in Skilling Australians Fund regardless of the amount
generated through the migration program training levy on businesses.
▪ The Government confirm its commitment that refunds will be available for businesses if a
TSS visa application is unsuccessful or if an applicant resigns during the term of the visa after
it has been granted.
Page 17ENVIRONMENT AND ENERGY
COST OF ELECTRICITY AND GAS
R&CA has been concerned with the significant increases to the costs of electricity and gas that have
occurred during the last financial year. Higher electricity prices are especially problematic for the café
and restaurant sector as they are hit twice; the business-owners themselves are forced to absorb
increases in their operating costs, whilst consumers are less likely to patronise their businesses due
to the impact on household spending and discretionary income levels. Whilst consumers can adjust
their levels of discretionary spending, cafés and restaurants do not possess this ability so they are
effectively locked in to this increased expense regardless of how many customers they serve.
Business-owners are also generally reluctant to pass on increased operating costs in the form of
higher prices due to a fear of customer backlash and the hypercompetitive nature of the industry.
R&CA urges the Commonwealth Government to ensure that energy security, reliability, affordability
and sustainability considerations are balanced. The pernicious incentive to ‘gold plate’ the system
that we have seen at a State level, for example, is part of the cause of the current imbalance in these
factors. For instance, a Federal Government analysis of the energy markets across all individual
Australian jurisdictions found wholesale prices were 30 per cent higher in Queensland than in other
states and territories.
Given that the average profit margin of a café or restaurant is 4.2 per cent25, even a modest overall
increase in electricity prices can have a crippling effect on the profitability of these businesses. The
concerns amongst restaurateurs and café-owners in relation to electricity costs were reflected in
R&CA’s 2017 Industry Benchmarking Report which found that a reduction in the cost of produce,
electricity and gas was the factor identified as making the biggest difference in running businesses
more successfully (see Figure 6).26 Those identifying a reduction in the cost of produce, electricity
and gas also increased from the corresponding 2016 survey. As such, R&CA would urge that the
2018-19 Commonwealth Budget contain specific measures designed to reduce the cost of electricity
for both households and small businesses. In particular, R&CA is strongly opposed to any new taxes,
levies or charges that increase the cost of electricity or gas.
25 Australian Bureau of Statistics (ABS) 2008, 8655.0 - Cafes, Restaurants and Catering Services, Australia, 2006-07.
26
Restaurant & Catering Australia (2017) Industry Benchmarking Report.
Page 18Figure 6: Factors Making the Most Difference in Running a Business Successfully
Source: R&CA 2017 Benchmarking Report, p.18.
Recommendation
▪ That the 2018-19 Commonwealth Budget contain specific initiatives designed to reduce the cost
of electricity and gas for small businesses and households.
▪ That the Commonwealth Government introduces no new taxes, levies or charges that increase
the cost of electricity or gas.
Page 19EDUCATION VET STUDENT LOAN SCHEME R&CA argues that the design of Australia’s vocational education and training (VET) system should be focussed on industries which are expected to generate significant employment growth in the future. Given that the tourism industry and in particular the café, restaurant and catering sector is expected to generate phenomenal employment growth over the next five years, there is a strong need for Australia’s VET system to cater to this demand. At present, the VET system is producing an insufficient number of qualified graduates required to meet the labour needs of the hospitality sector businesses. According to data from the National Centre for Vocational Education Research (NCVER) in the 12 months ending 31 March 2017, completions of apprenticeships and traineeships decreased by 15.1 per cent to 97,300.27 When examining the data over the previous four years, there has been an almost 50 per cent decrease in the completion rate of apprenticeships and traineeships.28 In R&CA’s view, the current design of the approved courses list must be urgently updated to address the decline in skilled hospitality sector graduates from the VET system. R&CA argues that the Diploma of Hospitality Management (SIT50416) and Advanced Diploma of Hospitality Management (SIT60316) should both be re-instated at either band $10,000 or $15,000 on the approved courses list as a matter of urgent priority. The current approved courses list relegates these qualifications to the lowest funding band of $5,000 which R&CA believes is grossly insufficient to provide the training needed to acquire the necessary skills enabling a long-term career path in the hospitality sector. R&CA advises that chronic skills shortages in the tourism and hospitality industries will continue to worsen unless both the Diploma and Advanced Diploma of Hospitality Management are placed in the $10,000 or $15,000 band. The training sector is already reporting an approximate 46 per cent year on year reduction in enrolments across the sector as a whole, with one large provider down around 50 per cent overall, but 90 per cent for domestic students. Furthermore, the current arrangements placing the Diploma and Advanced Diploma of Hospitality at the $5,000 band acts as a strong disincentive for providers to offer Certificate III and Certificate IV hospitality courses due to the under-enrolment of students at a Diploma-level. In this way, there is likely to be a ‘trickle-down’ effect on the delivery of lower qualifications such as Certificate III and 27 National Centre for Vocational Education Research (NCVER) (2017) Apprentices and trainees 2017: March quarter – Australia. 28 Ibid. Page 20
Certificate IV with fewer providers choosing to offer Certificate III and Certificate IV courses in
hospitality as well. As a result, students wishing to upgrade their qualifications after having worked
in the hospitality industry will have fewer options to do so, thus limiting their ability to pursue
hospitality as a long-term career path. A perceived lack of career pathways is a perennial and well-
documented reason as to why people, especially youth, are reluctant to enter the hospitality sector
as a long-term career.
R&CA warns that failure to update the approved courses list in this way will severely curtail the ability
of hospitality sector businesses to source the skilled labour they need to run their businesses
sustainably and effectively.
Recommendation
▪ The Diploma of Hospitality Management (SIT50416) and Advanced Diploma of Hospitality
Management (SIT60316) should both be re-instated at either band $10,000 or $15,000 on
the approved courses list as a matter of urgent priority from the current $5,000.
AUSTRALIAN APPRENTICESHIP SUPPORT NETWORK PROGRAM
R&CA strongly welcomed the Commonwealth Government’s funding commitment in this year’s
Budget of $60 million over two years from 2017-18 to establish an industry specialised mentoring
service to complement the existing In-Training Support services available under the Australian
Apprenticeship Support Network program. R&CA has long advocated for increased funding and
resources designed to increase the rates of retention across Australia’s VET sector. Past research has
shown that around 60 per cent of students who discontinue with apprentice courses do so within
their first year.29 R&CA argues that one of the most effective and successful ways of addressing the
alarming dropout rate in apprenticeship courses is through the development of industry mentoring
programs and would therefore urge the Commonwealth Government to maintain funding for this
initiative and extend the life of the program beyond the initial two-years.
Recommendation
▪ Funding for the Australian Apprenticeship Support Network program for industry specific
mentoring should be maintained as part of the 2018-19 Commonwealth Budget to extend
the life of this program beyond the initial two years.
29 Bednarz, A (2014) Understanding the non-completion of apprentices National Centre for Vocational Education Research (NCVER).
Page 21CONCLUSION Given the phenomenal growth expected in Australia’s tourism and hospitality sectors expected over the coming years, it is critical that the overarching policy environment is structured in such a way that promotes, rather than inhibits this growth. Therefore, it is essential that the Commonwealth Government’s 2018-19 Budget contains funding commitments to address chronic skills shortages across key hospitality sector occupations as well as structural deficiencies in Australia’s VET sector. R&CA warns that in the absence of sustained government investment, the employment and economic benefits associated with the hospitality sector’s growth may not be fully realised. The lack of suitably qualified candidates to fill skilled positions such as cook, chef and café and restaurant manager has been routinely identified as the most significant issue affecting the hospitality sector as a whole. R&CA also urges that the 2018-19 Commonwealth Budget contain specific measures designed to improve the current business operating environment in the hospitality sector, such as pursuing reductions in the cost of electricity and gas, raising the Superannuation Guarantee Threshold and extending the instant asset write-off program for at least another 12 months. There is a strong imperative for such measures, especially given the expected deterioration in operating conditions for hospitality businesses once the full impact of chronic skills shortages becomes apparent. The 2018-19 Budget represents a significant opportunity for the Commonwealth Government to implement a favourable set of policy conditions designed to maximise the future output of the tourism and hospitality sectors for the benefit of the entire Australian economy and workforce. Page 22
REFERENCES Australian Bureau of Statistics (ABS) 2008, 8655.0 - Cafes, Restaurants and Catering Services, Australia, 2006-07. Australian Bureau of Statistics (ABS) (2017) 8165.0 Counts of Australian Businesses, including Entries and Exits, Jun 2012 to Jun 2016. Australian Bureau of Statistics, (ABS), (2017) Retail Trade Data 8501.0. Australian Government, Minister for Small Business (2017) 300,000 small businesses benefit from instant asset write-off, Media Release, 13 October. Australian Government (2017) Minister for Trade, Tourism and Investment, Tourism records smashed, Media Release, 12 December. Bednarz, A (2014) Understanding the non-completion of apprentices National Centre for Vocational Education Research (NCVER). Deloitte Access Economics (2014) Australia’s international business events sector. Department of Employment (2016) 2016 Employment Projections, Industry projections to May 2022. Department of Immigration and Border Protection (2017) Fees and charges for visas. National Centre for Vocational Education Research (NCVER) (2017) Apprentices and trainees 2017: March quarter – Australia. Restaurant & Catering Australia (2017) Industry Benchmarking Report. Tourism Australia (2015) Restaurant Australia Results Tourism Research Australia (2017) Results of the International Visitor Survey: Year Ending September 2017, 12 December. Page 23
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