It’s time to give Australia’s economy the firepower to create jobs, attract investment, improve productivity and wages growth, innovate and export, and strengthen the budget, Business Council of Australia chief executive Jennifer Westacott said today.
“If we continue to muddle along we could be left with an extra $50 billion of debt every year,” Ms Westacott said.
“To pay for this debt, taxes would have to rise by $5,000 per household or $2,000 per person or we would need to drastically cut services – roughly the equivalent of the entire education and defence budgets combined.
“This is the stark picture that our paper released today, Economic realities – budget choices for a strong Australia, paints for our future.
“Avoiding the hard calls doesn’t just kick the can down the road, it leaves all Australians with fewer and even more difficult decisions to make in the future.”
The Business Council’s report sets out a range of policies needed to increase growth and deliver a strong economy:
- competitive tax settings
- efficient regulation and productive workplaces
- competitive and reliable energy
- efficient infrastructure
- a skilled workforce, and
- an open, outward looking economy.
The report shows a high-growth path with modest restraint in real spending growth would deliver higher revenues and a sustained budget surplus. This means the government can maintain its capacity to pay down debt and fund vital services.
If GDP growth was averaging 3.5 per cent a year over the next few decades that would not only deliver average real incomes of around $160,000 (in today’s dollars) but tax revenues would be some $290 billion higher (in today’s dollars) than projected in the latest Intergenerational Report (IGR).
On the other hand if GDP growth were to remain at its current rate of around 2.5 per cent a year and spending grew at 3.1 per cent a year as projected by the IGR, then the budget deficit would build to around 8 per cent of GDP by 2054-55, a deficit of more than $140 billion in today’s terms. Tax revenues would also be $100 billion lower and income per person would be around $14,000 less than projected by the IGR.
“The false promise of taxing more to spend more has been exposed for what it is — a dead end,” Ms Westacott said.
“We need to increase growth if we are to deliver a strong economy and ensure Australians can have better-paying jobs, and the ability to provide for and protect their families.
“It’s clear we need to act, to protect Australians we’ll need to see a budget on Tuesday night that tackles the key problems.
“The one choice we can’t make is to just let things drift as they are. If we do, in 10 years’ time, people will look back and ask, ‘how did that happen’? It’s a question we shouldn’t have to answer.”