Federal Budget changes bad news for industry -

Changes in the Federal Budget will see alterations made to the diminishing value rate for depreciating assets, which are to be increased from 150 per cent to 200 per cent for eligible assets acquired on or after 10 May 2006. This measure is estimated to be valued at $3.7 billion over a four-year period.

These changes will impact the industry because the accelerated depreciation measure will give print companies the opportunity to write off new plant and equipment at a faster rate.

The latest Printing Industries Trends report shows capacity utilisation rates to have deteriorated during the recent March 2006 quarter, and Hagop Tchamkertenian, manager of industry and commercial policy at Printing Industries, claims this could worsen with the latest budget measures.

“The changes will work against the industry if printers are encouraged to invest in areas in which they already have excess capacity, such as new presses,” says Tchamkertenian.

He claims printers would see more benefits from using the money gained from the new depreciation regime to invest in areas traditionally not given enough attention, such as prepress, post press and value-added services.

“Commercial printing companies should be investing their money in areas that are going to increase profit margins and allow them to adapt to changing customer requirements, rather than in traditional areas that could prove to be counterproductive,” he says.

“Printers suffering from idle capacity need to undertake proper cost-benefit analysis to justify any new investments in presses.”

Official ABS data indicate that up to $800 million in investment is already in the pipeline for the industry.