Statement on the 2014–15 Federal Budget

General response

“The 2014–15 federal budget is a solid start to putting the fiscal strategy back on track, but there is much more work to do to support growth and deliver a sustainable budget position for the long term,” Business Council of Australia Chief Executive Jennifer Westacott said.

“This budget needs to be seen as the start of 10-year strategy that brings spending under control and lifts fiscal discipline, grows the economy and shores up our revenue base, and provides for a sustainable social safety net. It’s a strategy that heavily depends on improving the effectiveness and efficiency of government service delivery.

“While the budget has had to grapple with difficult choices, it should give business and the community greater confidence that Australia is starting to lay down the foundations for a stronger future.

“Working from a very difficult budgetary starting position, the government deserves credit for taking important steps to confront the long-term challenges Australia faces from an ageing population.

“The achievement of a substantial surplus in 2023–24 appears to be heavily reliant on reduced growth in health and education payments to the states. Achieving a credible return to a sustainable surplus requires the government to commit to vastly improved policy design, process, implementation and evaluation.”

Ms Westacott said it was disappointing to see ad hoc measures such as the deficit levy included in this budget.

“Changes to health and social security arrangements need to be implemented carefully and sensitively to ensure the safety net remains for those who need it most and to avoid unintended consequences of changes that could place an unfair burden on particular groups in the community.

“We are very concerned about the risk that savings are falling too heavily on some families and young people trying to find work. It is important that we lift our game now in skills development, improvements to job services programs and more flexible workforce arrangements.

“However, what this budget makes clear is that as our population ages and globalisation places our economy under greater competitive pressure, there are no more easy choices available to government,” Ms Westacott said.

“The federal budget is more than a bookkeeping exercise – it is a strategic tool to build our economic resilience and a statement about what kind of society we want to bequeath to future generations.

“But nobody should view this budget as a ‘set and forget’ exercise. It is just the start of a strategic change agenda that must include fixing roles and responsibilities in the federation, improving our workplace relations system, pulling down barriers to competition, tax reform, and locking in the quality and affordability of the safety net.”

Budget specifics

Fiscal/spending

“Getting the fiscal strategy back on track is vital to ensure we can afford the infrastructure, services and skills required to build Australia’s economic resilience.

“The projected path to surplus is steady and credible, but it is clear that another tranche of structural measures will be necessary in next year’s budget to lock in the long-term sustainability of spending. Of the $36 billion in savings, at least 20 per cent represents some form of temporary measure.

“However, spending discipline is being steadily restored, with real spending projected to grow at 0.8 per cent each year over the forward estimates.

“The changes to indexation and funding for health and education services to the states will only succeed through a major realignment of federation roles and responsibilities.”

Ms Westacott said the consolidation of public service agencies was welcome. “It will be important for the government to use this process to build the capability and productivity of public servants who will be responsible for a major change management effort.

Economic growth

“On physical infrastructure, the additional $11.6 billion for the Infrastructure Growth Package to support asset recycling with the states, boost road and rail funding and invest in Western Sydney is a significant investment in the growth of the economy,” said Ms Westacott.

“The growth projections in the budget have real GDP remaining below trend over the next 12 months, highlighting the need for Australia to boost productive capacity and remove regulatory and other impediments to non-resources investment.

“Growing the economy requires Australia to adopt a more global mindset and an unprecedented focus on innovation and knowledge infrastructure.

“Some of the cuts to research and development and industry assistance programs are not consistent with this imperative, nor is the constant chopping and changing in the R&D funding arrangements which by their nature need to be long term and predictable.

“At a time our economy is undergoing significant transition, it is a legitimate function of government to build economic resilience by assisting emerging industries likely to have a comparative advantage in the future. This is an investment in job creation and future sources of revenue.”

Revenue

“While the deficit levy has been introduced for equity reasons, it does not substitute for the hard work of reform. Any changes to tax arrangements should be considered as part of a broader strategic review of the tax system.

“The budget highlights the importance of considering major revenue reforms as part of the tax white paper, complemented by streamlining the roles and responsibilities of government through the federation white paper process.

“It is critical that new revenue measures better support growth, investment and job creation while strengthening the revenue base over the long term.”

Social programs

“Government decisions that impact the social safety net and the delivery of government programs must be aligned with incentives for workforce participation. Business must contribute to this by offering more flexible workplace arrangements.

“However, there will always be people who cannot work, and this is why we must ensure the sustainability, quality and adequacy of welfare.”

Ms Westacott said the only way to make savings sustainable without compromising the quality of government services was to improve the way programs are designed and delivered.

“In the healthcare system, for example, this will require better use of technology and data analysis, and farsighted innovation in service delivery.

“If we don’t improve the way services are delivered, the savings that have been made today will simply be eroded over time,” Ms Westacott said.

Going forward

“Ultimately, the strategic change agenda foreshadowed in this budget has to be about delivering better outcomes for the economy and all sectors of the Australian community,” said Ms Westacott.

“Beyond tonight, this requires a far more collaborative approach by government at all levels, businesses of all sizes, academia and the broader community.”

For further information contact:
Scott Thompson, Director, Media and Public Affairs
Business Council of Australia
Telephone (03) 8664 2603 | Mobile 0403 241 128