The Business Council of Australia says today’s decision by the Reserve Bank of Australia to increase the cash rate by 25 basis points to 4.1 per cent reinforces the importance of the Federal Government’s focus on responsible spending and productivity reform in the upcoming Federal Budget.
BCA Chief Executive Bran Black said higher interest rates put pressure on households and businesses and emphasised the need for fiscal discipline and productivity in the lead-up to the Budget.
“At a time of global uncertainty and rising inflation, the Treasurer is right to say this Budget is even more important and must therefore be ambitious on productivity measures,” Mr Black said.
Mr Black said the Business Council’s Global Investment Competitiveness Index highlights why improving Australia’s investment settings must be a central focus of the Budget.
The Index found Australia currently ranks 21st out of 42 advanced economies for investment competitiveness, showing the need to strengthen our attractiveness for global investment.
“If we want stronger wages and higher living standards, we need policies that make Australia more competitive for the investment that drives productivity and economic growth.”
Mr Black said regulatory reform should be a priority to improve Australia’s competitiveness.
“The Business Council and the Alliance of Industry Associations, with which we work, have called for a 25 per cent reduction in unnecessary regulatory costs across the economy.
“Cutting red tape is one of the quickest ways governments can boost productivity and encourage business investment.”
Mr Black said the Budget also provides an opportunity to pursue targeted tax reforms that strengthen incentives for investment and innovation.
“Australia’s business tax settings must remain competitive in a world where countries are aggressively pursuing investment.
“Measures such as immediate expensing would help lower the cost of investment and encourage businesses to invest in new equipment, technology and expansion.”
Mr Black said the Budget also presents an opportunity to improve Australia’s research and development settings following the release of a major government report today.
“Improving our R&D settings will help attract investment, drive new economic opportunities and support higher living standards,” Mr Black said.
“We strongly support reforms to the Research and Development Tax Incentive to make it simpler and more effective, including removing the $150 million cap, streamlining administration and removing the R&D intensity measures.”