“The Mid-Year Economic and Fiscal Outlook (MYEFO) highlights the inescapable need to carefully return to a structural surplus that is achieved through major program redesign, and to push ahead with growth-oriented initiatives such as comprehensive tax reform,” Business Council of Australia (BCA) Chief Executive Jennifer Westacott said.
“The MYEFO numbers underscore that tax reform needs to focus on delivering a growth dividend and a more durable and stable revenue base. We are over-reliant on a relatively narrow, volatile tax base and must undertake reforms to reduce our reliance on taxes that discourage productive investment, effort and risk-taking,” Ms Westacott said.
“Any suggestion that increasing the overall tax burden is the solution to Australia’s budget problems is dangerous and short sighted. Simply raising taxes would only undermine economic growth and future revenues.
“Governments must not walk away from serious reforms to the federation because meaningful redesign of spending programs and reforms to taxation will require changes at the state as well as federal level.
“While policies to increase economic growth are an essential aspect of strengthening the budget, returning to surplus over the medium term will require slowing the rate of growth in spending.
“Bipartisan agreement is now urgent on the need for major spending programs to be redesigned in a way that improves outcomes and efficiency, and slows the rate of spending growth.
“This is a once in a decade opportunity to redesign services to deliver better outcomes and lower cost. We are not just spending too much money, we are wasting money.
“How can we justify an estimated 20 per cent waste in health spending, or a 40 per cent increase in spending on school education when we’ve gone backwards on results?
“Left unaddressed a higher budget deficit will inevitably lead to higher debt and higher taxes for future generations to pay. Gross debt is now projected to grow to almost $650 billion by 2025-26. Interest payments on net debt will rise to almost $20 billion, crowding out spending on services.
“The $2.3 billion deterioration in this year’s budget and $26.0 billion over the forward estimates is not unexpected, but that does not make it tolerable. We must not become inured to higher deficits and debt - they are not mere bookkeeping entries.
“These are debts we are passing on to another generation, and services that other generations can’t have,” she said.