The Business Council of Australia (BCA) says the Federal Government must implement a 10-year plan to achieve sustainable fiscal reform.
As part of its 2015-16 Budget submission report, the BCA noted Australia’s $40 billion deficit “has been ten years in the making” and the next decade will be crucial in progressively returning the budget to surplus.
Australia has a 10-year window to make the necessary transition in a deliberate and inclusive way. Difficult decisions will need to be made, but incremental adjustment paths will help cushion impacts on the community and prevent undue hardship.
The Council says the Government’s 2015–16 Budget should avoid any new net expenditure commitments, seek to implement modest fiscal correction, complete unfinished reforms with modifications (i.e. higher education reforms with better safeguards and graduated steps for pension indexation) and reconsider Newstart eligibility.
The table below outlines the BCA’s four primary fiscal goals for its 10-year strategy and details how they can be realised.
The BCA says the current budget deficit puts Australia in a precarious position.
“The GFC triggered a $70 billion deterioration in the budget over just two years. If another GFC hit today our starting point would be a $40 billion deficit and net debt of 15 per cent of GDP, in stark contrast to the $20 billion surplus (and zero debt) in 2008.
A similar shock and response today would leave a deficit of around $110 billion or 7 per cent of GDP, and increase Commonwealth net debt to around 20 per cent of GDP. A deficit of this order of magnitude is nearly twice the Commonwealth’s current health spending and more than half total individual income tax receipts.
The Council’s 10-year, staged reform allows for changes to be made gradually to assist businesses and the community transition to new policy settings.
“In short, the submission argues that this year’s budget is an opportunity to lay out a positive vision for economic growth and the coherent set of policies and actions, including structural budget improvement, that will deliver it,” BCA chief executive Jennifer Westacott said.
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