“The National Commission of Audit Report presents a stark picture of the unsustainable spending path Australia is currently heading down,” said Business Council of Australia Chief Executive Jennifer Westacott.

“The report highlights that nothing short of major structural changes to spending programs, and government roles and responsibilities, will get us back on track,” Ms Westacott said.

“The report is a blunt reminder that Australia lost control of its fiscal strategy, and that putting off hard decisions will only lead to even harder ones in the future. There can be no more excuses for further inaction and for anything less than fundamental reform.

“The challenge for government is to ensure any adjustment does not hit the poorest people too harshly or place too heavy a burden on younger people compared with other groups in the community. The cumulative impact on particular groups within the community needs to be assessed carefully and compassionately.

Ms Westacott said the commission was correct to focus on pulling back the cost growth of the biggest programs, including age pensions and family payments. However, she said it was essential to determine the appropriate transition path for the groups of people affected.

“The forthcoming Budget is the government’s first opportunity to mark out a long-term framework, using the commission’s recommendations as inputs where appropriate, which aligns policy and implementation around four equally important national pillars.”

These four pillars are:

• policy that will drive economic growth
• unprecedented fiscal discipline
• shoring up our revenue through a better tax system
• good social policy that protects disadvantaged people, lifts the skills base of the population and improves workforce participation.

“The challenge for the government is to lay out a vision for how we are going to grow the economy. The only way to shore up living standards and prevent the need to make harder and harder calls on the expenditure side is to the grow the economy faster,” Ms Westacott said.

“To do that, we have to come to terms with the globally connected, technology-driven world we live in and in which our companies need to compete. This requires a global mindset and an unleashing of innovation the like of which we have never seen.

“The commission’s recommendations on the size and scope of Austrade’s operations, the scaling back of R&D, and changes to some skills programs may not be consistent with what is needed to drive economic growth. The government will need to carefully consider whether these recommendations align with national growth objectives and the world we live in.

“The report provides a very clear and compelling case for a fundamental rethink of the respective roles and responsibilities of the Commonwealth and state/territory governments, and on the broader role of government.

“As difficult as it is, the commission is right to call for a reduction in the number of Commonwealth Government agencies and streamlining of the size of some departments, but this must be carefully managed to avoid unintended consequences including cutting functions which are helping to transition the economy.

“While the bureaucracy should be encouraged to be more accountable and effective, we also need to be building the capability of the public service as one of the great institutions of our society. The reforms Australia needs to undertake involve a change management program the scale of which we have never seen.

“On fiscal discipline, we need an unambiguous commitment to new fiscal rules and to the very sensible suggestions the commission has made for greater accountability and transparency.

On revenue, Ms Westacott said the commission’s report highlighted the urgency of tax reform.

“Australia doesn’t need any more piecemeal or ad hoc tax changes. The government should get on with realigning the tax mix to ensure we have adequate revenue and a platform which supports investment and growth,” she said.

On social policy, if Australia is to preserve its sense of fairness, there needs to be good social programs in place that allow people to train, retrain and re-skill as the economy changes so they don’t fall into long periods of unemployment.

“The BCA believes much more thinking needs to be done on the minimum wage. The minimum wage is one of a suite of policies determining living standards and workforce participation and should be considered in conjunction with the tax–transfer system and workplace relations system, not in isolation,” Ms Westacott said.

Ms Westacott said the BCA was disappointed that the commission had supported the continuation of a levy on business to pay for the government’s proposed paid parental leave scheme. “Once again, in a sluggish economy where we need to drive economic growth, we have missed an opportunity to point to a pathway for genuine corporate tax relief.

“It is up to government now to develop the strategic framework, not for theoretical or ideological reasons, but to give us the resilience to manage future shocks and the scope to grow the economy, and improve the skills, infrastructure and services that will underpin Australians’ living standards into the future,” she said.

Business Council of Australia Submission to the National Commission of Audit (December 2013)