“The second Federal Budget for 2022 will be delivered in a challenging macroeconomic environment with the economy struggling against imported inflation and domestic inflationary pressures fuelled by high domestic demand and a tight labour market,” Innes Willox, Chief Executive of national employer association Australian Industry Group (Ai Group) said today.
“With the burden for slowing the economy currently heavily reliant on monetary policy, employers will be hoping that at the very least the budget should not add to this reliance with an approach that overstimulates the economy putting further pressure on interest rates. This risk is high over the next eighteen months or so by which time inflation is anticipated to return to the Reserve Bank’s target range of 2-3 per cent.
“The Government intends to find savings and to scrap some of the previous government’s initiatives to help address budgetary pressures and to finance its own commitments. Any such savings should be carefully assessed against the medium-term priorities expressed at the Jobs and Skills Summit of lifting the pace of productivity growth and real incomes growth both of which have been stuck in the slow lane for several years.
“In this regard, we caution against putting aside efforts targeted at the development of workforce skills, stimulating private sector innovation, and lifting the capabilities of Australia’s small and medium sized enterprises including in the areas of digitisation, cyber security and exporting. While improvements can be made to existing programs, we caution strongly against putting aside these important policy objectives.
“There is a clear imperative to lift business investment. While this is a complex area and will require careful consideration of our approach to taxation, a near-term measure with little structural impact on the budget would be to extend the availability of the immediate write-off of capital expenditure. With global supply chains still patchy, many businesses are faced with delays in the availability of capital equipment with the result that their plans to have these investments in place by the end June 2023 are looking increasingly shaky.
“Ai Group has also expressed strong support for the Government honouring its commitment to the Stage 3 tax changes legislated to commence on 1 July 2024. Delivering these tax changes as promised is important both for trust and keeping faith and because they are good policy.
“In relation to the broader issues of revenue adequacy raised in some of the discussion about the Stage 3 tax changes, we continue to urge the Government to reopen community-wide discussions of the importance of remodelling Australia’s taxation arrangements. Remodelling is necessary so the government can better accommodate long-term fiscal pressures while also better supporting an expansion of productive capacity and at least retaining the current degree of income redistribution,” Mr Willox said.
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