Mid-Year Economic and Fiscal Outlook Priority Must Be Growth, Not Surplus at Any Cost

The Business Council of Australia urges the federal government to focus in its forthcoming Mid-Year Economic and Fiscal Outlook on growth and outlining a credible fiscal strategy rather than delivering a surplus at any cost.

Business Council of Australia President Tony Shepherd said with the world economy extremely uncertain, and with government revenue falling dramatically as a result of lower commodity prices and patchy business conditions, now was the time to do everything possible to support a stronger and more competitive economic environment.

“The Business Council has been one of the strongest supporters for the goal of achieving a surplus in 2012–13, but we always said this should not be at any cost and should be able to be revisited if economic conditions deteriorated,” Mr Shepherd said.

“With unemployment rising and with the resources sector slowing down, it is becoming clearer that lower-than-expected revenue may make achieving a surplus in 2012–13 difficult without taking steps that will jeopardise growth over the medium term.

“The most important priority is for the government to lay out a credible medium-term fiscal strategy that achieves a sustainable surplus which supports a competitive business environment and continued growth.

“The community would accept a small deficit in 2012–13 provided the budget strategy marked out a clear path to a stronger future through policies which support economic infrastructure, jobs and skills, and make it easier to do business so the economy can stay strong after the mining boom eases.

“The upcoming report of the Business Tax Working Group, which involved input from different sectors of the community, has looked at options for dropping business tax concessions to fund a company income tax cut to reduce the overall burden of tax on business.

“As the Business Council’s submission to the review pointed out, the terms of reference which required a company income tax cut to be funded from changes to other business tax arrangements would not deliver an overall benefit to the economy.

“The Business Council could not support any of the savings options considered by the Business Tax Working Group because they either could not be accurately costed or they represented considerable risk to companies in important sectors, many of which are doing the heavy lifting in the economy.

“Business still needs lower company income tax to keep our economy competitive and support jobs and wages growth but this should be delivered as part of comprehensive tax reform not through actions which will make some companies in some sectors worse off at a time when they are already under serious competitiveness pressures.

“The forthcoming MYEFO and subsequent Budget should be important steps in a long-term fiscal strategy that will support growth, and increase Australia’s ongoing resilience in the face of an uncertain global economy.”