The federal government has taken some necessary steps in the 2011–12 Budget to support productivity and to ensure the nation’s finances are sustainable over the medium term, Business Council of Australia Chief Executive Jennifer Westacott says.

“This is a sound Budget to support a stronger future,” Ms Westacott said. “It has the right mix of spending restraint and measures to support growth, such as the skills package and the focus on infrastructure.

“We welcome the projections the government intends to deliver a budget surplus by 2012–13. However, with the budget deficit increasing to $49.4 billion in 2010–11, an unprecedented level of vigilance will be required to achieve the projected surplus.

“It is encouraging that the return to surplus has been built on significant expenditure restraint, with the government projecting that it will meet its 2 per cent cap on annual spending growth.

“While the economy is underperforming in parts, there are sound prospects for growth overall. With growth projected to strengthen above 3.75 to 4 per cent, now is the time to get our house in order so we can build our finances to meet our future challenges.

“The Budget takes steps now to bring expenditure under control and to support growth. The focus on improving access to skilled workers and strengthening our national infrastructure planning are critical to the growth challenge.

“The Budget includes some difficult but necessary measures which deal with anomalies in the tax system, the sustainability of indexation arrangements for some transfer payments and a reprioritisation of certain spending including in Defence.

“It confirms a modest reduction in the company tax rate and takes some important steps in reducing disincentives in the welfare system that prevent many people from participating in the workforce.

“What is needed from here, however, are further bold reform measures including wide-ranging tax reform. We urge the government to be ambitious at the tax forum later this year,” she said.

In its submission to the Budget, the BCA called for a continuing commitment to deliver the surplus, as well as new policy measures to address looming skills shortages and renewed funding and a refreshed mandate for Infrastructure Australia.

“The importance of building our economic capacity should not be understated. It is fundamental if we are to pay for our future challenges such as our ageing population and the infrastructure to support a higher population,” Ms Westacott said.

“The longer we put off returning to surplus the harder the task would be.

“In the area of skills the BCA called for a three-pronged strategy built around improving the education and training of Australian workers, maintenance of the permanent skilled migration program and new initiatives in the area of temporary migration. The skills package included in the Budget comprehensively addresses all of these areas.

“There has been $3 billion in funding committed to new skills training initiatives including several to be implemented in conjunction with industry.

“The Budget has announced a 10 per cent increase in the skilled migration program for 2011–12 and has confirmed a number of sensible measures which add flexibility around temporary migration arrangements with relevance to business.

“The skills package is a clear highlight of the Budget and will be good for the economy in helping to ensure that we can deliver major investment projects in years to come.

“The measures to improve education completion rates, fast-track apprenticeships and lift the performance of Australia’s training system will drive productivity and lift workforce participation.

“We are very pleased to see an increase in the overall level of skilled migration and the targeting of skilled workers to where they are most needed.

“We also welcome the renewal of funding for Infrastructure Australia and the proposed arrangement for enhancing transparency, including the commitment to publish cost–benefit analyses as well as the National Infrastructure Construction Schedule.

“The key now is to get a long-term infrastructure plan and the reforms that will make it easier to deliver major projects in Australia,” she said.

The BCA submission also called for improved budgetary governance through greater transparency in the budget papers on the sensitivity to movements in commodity prices, and the establishment of a new independent Commission of Budget Integrity.

“There have been no major steps taken this year towards improving the transparency in the budget papers on the sensitivity to commodity price movements, or the establishment of a Commission of Budget Integrity.

“We will continue to advocate these as important measures to ensure long-term fiscal sustainability, and to provide independent analysis of key long-term economic assumptions so we can be sure of the value for money in government spending.

“Overall, this Budget will strengthen Australia’s economic foundations. However, we need to be conscious that the economic headwinds Australia will encounter in future will inevitably become stronger, requiring bold policy leadership.” Ms Westacott said.