With so much good news coming out of the mining sector, such as Pilbara Minerals ramping up their operations and Gascoyne extending the life of their Dalgaranga mine, we often overlook the whole economy.
Various government COVID-19 restrictions have meant many have lost their job, with the official unemployment rate standing at 6.9 per cent and the underemployment rate at 11.4 per cent, according to the Australian Bureau of Statistics. The Federal Government has pledged $1.5 billion to get manufacturing and mining moving so Australia can be more self-reliant.
So, is now the time to buy mining equipment?
With so many government incentives and guarantees on offer, it makes more financial sense to purchase mining equipment such as excavators, trucks, tower cranes, frannas, mine-spec workbenches, and other types of equipment that your mine needs to keep itself operation over the long-term.
Business and equipment finance expert, Bill Tsouvalas, says that various government loan guarantees, and write-offs are some of the most generous we’ll ever see.
“The government is guaranteeing loans up to $1 million for businesses with up to $50 million in turnover for a broad range of business purposes, most of all to support investment and bolster economic recovery,” Tsouvalas says.
Loans can be either unsecured or secured and have a term of five years. Banks and lenders may extend a six-month repayment holiday, depending on the lenders’ internal credit assessment process.
This is ahead of 2021’s modern manufacturing initiative, which will see $1.3 billion invested into national manufacturing priorities, which includes resources technology and critical minerals processing.
“The aim of all this is to get the resources sector back on track for the benefit of Australia,” Tsouvalas says. “However, 2021 is a long way away for many mining and resources businesses and these current guarantees won’t last forever.”
The scheme will only be available until 30 June 2021.
Low interest rates and tax incentives
The main motivator to buy is to lock in historically low interest rates and take advantage of instant asset write-offs. The Reserve Bank of Australia cash rate is at 0.25 per cent and may even go as low as 0.1 per cent – but “a quarter of a percent is likely the best we’re going to get,” Tsouvalas says.
“A five-year fixed rate loan at this point will be as competitive as it gets. Writing off all or a portion of your asset purchase is also a huge sweetener too.”
Opting for secured loans such as chattel mortgages or hire purchases are subject to further savings and write-offs such as claiming GST paid, interest payments, depreciation, and the fuel input tax credit.
“This may be a great time to invest in equipment and get ahead of the competition when it comes to the manufacturing initiative. Rates and subsidies won’t be like this again, at least not for a very long time.”