“The 2016-17 Federal Budget is a solid, responsible budget that balances holding the line on spending growth with new initiatives to improve the nation’s economic growth prospects,” Business Council Chief Executive Jennifer Westacott said.

“The Budget had two big tasks this year – stay on course to a credible structural surplus, while equipping the economy with the means for faster growth to support long-term jobs and prosperity. On these two measures, tonight’s budget is heading in the right direction,” Ms Westacott said.

“A budget which is fiscally responsible as well as supporting growth is a budget which can deliver on fairness and our future success as a nation – it means more jobs and higher national incomes, and more revenue to pay for health, education and welfare services. 

"This budget and those over the next decade should demonstrate that growth and fairness are mutually reinforcing. Successive budgets must support growth and fairness by creating strong incentives to invest to create jobs, and by ensuring the capacity to deliver essential support, effectively and efficiently, to those who need it. They must do this without adding to the deficits that will have to be paid for by future generations.

“Australians are facing a choice between muddling along and accepting lower living standards, or seizing higher living standards which come from a Budget which is not in permanent deficit and which supports a stronger economy.

“The best way to boost growth now is giving businesses greater capacity to invest in more productive enterprises, and giving workers a better reward for their effort. By acting now to carefully move towards more competitive business taxes and making inroads on bracket creep on individuals the government has given the economy a much needed shot in the arm.

“The government has also laid the groundwork for long term growth with a major investment in productivity-boosting infrastructure and measures to improve education outcomes,” she said.

Economic commentary

The deficit is still persisting above two per cent of GDP, which highlights the government needs to continue the work of redesigning major spending programs, a task which will be made more difficult by the volatility of revenues over the forward estimates.

While there has been some welcome structural savings, such as superannuation tax concessions, it remains the case that tax revenue overall is still doing a lot of the heavy lifting, highlighting further spending reform will still be needed in the years ahead.

The Budget highlights the delicate transition from resources-led growth that is underway in the economy and the continuing need for economic reforms to improve the nation’s competitiveness.

Growth is set to remain below trend for the next year, with subdued business investment to continue and muted wages growth to place continuing pressure on revenues.

The realisation of a small surplus in 2020-21 will be highly dependent on stronger economic growth delivering higher revenues, along with considerable spending restraint beyond the forward estimates.

Tax initiatives

The Budget has started the process of reconfiguring the tax system to support higher growth and jobs.

The government has rightly recognised that durable budget repair will not be achieved by increasing the overall tax burden.

The government’s 10-year enterprise tax plan is the signal that Australia’s businesses need to drive greater investment, and create more jobs, better jobs and higher paid jobs.

It’s an immediate reduction for the small and medium business that need relief now.

For big business, which operates on longer investment cycles, it’s an important signal that their investment will be more competitive down the track.

Spending

The $1.2 billion Quality Schools, Quality Outcomes package is a much-needed and evidence-based approach to driving improved outcomes in our schooling system.

Despite a 37 percent increase in real spending in school education over 10 years, Australia has gone backwards in literacy and numeracy and is lagging behind China, Hong Kong, Singapore, Japan, Korea, Finland, Taipei, Canada, Poland, and Estonia.

This package reflects the government’s commitment to lift literacy and numeracy levels to better prepare our young people for the jobs of the future.

On higher education, the government has put forward a sensible consultation process to identify how we get a tertiary system for the 21^st century and deal with some of the unsustainable funding in the current model.

The roll out of the $50 billion national infrastructure plan, which includes provision for major regional and urban rail projects and upgrades, road upgrades and a boost to the asset recycling program with the states will continue to support higher productivity and better lifestyles for many Australians.

The continued implementation of the government’s innovation agenda, including the new investment in cyber capability, will strengthen our comparative advantage as a trusted place to do business.

The Youth Jobs PATH program is a practical and welcome initiative to create different ways for young people to get into work and provide them with the support and skills to stay in work. Business will step up to the mark on this to offer as many opportunities to young people as possible.

Savings

The tightening and better targeting of superannuation tax concessions, is a sensible approach to finding savings while ensuring the system remains focused on reducing reliance on the age pension and providing comfortable retirement.

We support the government’s multinational tax avoidance measures which are sensible and pragmatic, and will ensure companies pay their fair share of tax as well as giving the community confidence in the integrity of the system.

The Business Council will actively encourage its members to adopt the voluntary Tax Transparency Code.

Conclusion

“The last thing Australia needed in the current economic circumstances was a big spending and taxing budget that would place our credit rating at risk and jeopardises the capacity to grow the economic pie to underpin the jobs and higher incomes we all want.

“While the budget highlights that there is still work to be done in coming years to put the nation’s finances onto a sustainable footing for the future, the government has laid down a solid framework in this Budget for that work to continue.

“By keeping new initiatives firmly focused on growth and jobs the government has made the task of continuing to improve the structural position of the Budget in coming years more achievable,” Ms Westacott said.