Federal Treasurer Wayne Swan’s first budget has made significant progress towards realigning fiscal policy with the needs of a capacity-constrained economy.
BCA President Greig Gailey welcomed the government’s efforts to limit spending growth through more effective targeting of policies and programs.
“This budget makes an important down payment on Australia’s future prosperity in the face of new challenges on the domestic and global fronts. The government has put the brakes on real spending and delivered a significant surplus which will be reinvested in future growth,” Mr Gailey said.
“Real spending is set to grow at half the rate we have seen in recent years, and this has been achieved without sacrificing spending in key areas such as education and infrastructure. This will take pressure off the economy and increase our capacity to grow over the longer term.
“But the job cannot end here. The task of maintaining downward pressure on inflation and repositioning fiscal policy towards investments in future growth rather than measures that encourage consumption must continue beyond this budget.
“While positive steps have been taken, ongoing attention needs to be paid to the quality of government spending and to improved fiscal processes and accountability, including better coordinating and planning across state and federal governments.
“The budget creates a solid foundation for a broader reform agenda that delivers on these objectives, but disciplined fiscal policy must be an ongoing feature and not simply a first budget effort.
“The budget maps out a clear agenda for sustaining strong growth, including through a further lift in skilled immigration, but importantly also lays the foundations for ensuring that growth today does not compromise future economic or social prosperity.
“Significant investment in infrastructure and education is critical to sustaining Australia’s economic prosperity,” he said.
The establishment of the Building Australia Fund is an effective way of ensuring that today’s strong revenue growth can be better directed to meet Australia’s long term infrastructure needs. The emphasis on careful prioritisation of investments, coordination across governments and rigorous vetting of projects is very positive.
Education and Skills
We note the confirmation of election commitments to invest in school education by providing computers for senior secondary school students and funding trades training centres. The funding to implement the election commitment of providing 630,000 additional training places with a focus on skills needed by Australian industry is welcome. The future Australian workforce will require a much higher proportion of the workforce to have recognised and relevant skills and for these to be updated on a regular basis. The additional $5 billion for higher education and vocational institutions in the form of an investment fund, worth a total of $11 billion, is also welcome.
The BCA welcomes the tighter targeting of government benefits and assistance to those most in need and disadvantaged. This should help to reduce wasteful welfare churning and increase the effectiveness of spending in lifting social prosperity. Improving the welfare and opportunities of Indigenous Australians is now critical and the efforts outlined in the budget are strongly supported by the BCA. Careful assessment of programs and outcomes will be needed to ensure genuine progress is made over time.
Investing in mitigation, adaptation and research and development in low emission technologies is critical to Australia’s response in managing the risks associated with climate change and reducing emissions. The continued emphasis on R&D and measures to support R&D in these areas is particularly welcome. It is important that any short term or ‘transitional’ measures are consistent with the objectives and design of a long term emissions trading scheme.
The BCA welcomes the release of the terms of reference for the tax system review. The BCA has been at the forefront of calls for reform in recent years, and is particularly pleased that the review will examine the role of state taxes, an important step towards modernising the Australian federation. Making Australia’s international competitiveness a core element of the review will be critical to the longevity of resulting reforms. The decision to review both the role and structure of company taxation is also welcome.
We note the tax cuts have been delivered as expected, and welcome the down payment of $6 billion towards plans for more fundamental reforms of personal tax in coming years.