A Budget of Short Term Appeal, But Bigger Missed Opportunities and a Failure on Company Tax
Statement by Peter Anderson, Chief Executive
Tuesday 8th May, 2012
Tonight’s federal budget is ambitious for Commonwealth finances but lacks vision for the broader economy.
It is strong in its ambition to repair government finances, limited in its support for the economy and spoilt by its intention to proceed with the carbon tax and failure to deliver the promised company tax cut.
In key areas, social policy has usurped the drive to a stronger economy.
Returning the budget to a $1.5 billion surplus over the next year is an ambitious goal, but one that should be supported by the business sector so long as economic conditions improve as forecast. The proposed fiscal contraction of over 3% of GDP in such a short period borders on the high risk, but can be justified so long as growth does not dip below the forecast 3.25%.
Some of the savings measures, and especially abandonment of the company tax cut and tighter criteria to access some traineeship funds, will be contentious inside the business sector, but the broad fiscal strategy should not be.
Support for the economy is disappointingly limited except in a couple of areas. Australia has become an expensive country in which to do business and competitiveness and productivity has dipped. The budget does little to arrest this slide apart from welcome initiatives such as:
- Targeted new funding for skills and workforce participation (including $19.4 million for trade persons to upskill into their own business, an ACCI proposal)
- A loss carry back scheme for small business and the formerly announced accelerated instant asset write off.
There is no sign of broader based tax reform on the horizon – most that is there is swamped by the carbon tax. There is nothing else to defray business costs and little to support export industries hit by the high dollar.
The decision to abandon the company tax cut is dripping with politics and a low blow to the business sector given that the quid pro quo mining tax has already been legislated. It represents backsliding by the parliament on even modest tax reform.
There is a $400 million loss to business when the value of the company tax cut is compared to the gain of the loss carry back scheme.
The failure to outline a mechanism for a wage tax trade-off for next year’s higher superannuation levy is a missed opportunity and will accentuate business unease that employers will be forced to foot the bill.
Especially disappointing is the decision to proceed with the carbon tax from 1st July. This is the budget where that decision needed to be set aside until a global agreement involving our competitor nations is reached. The failure to do so is a setback for competitiveness and common sense.
The carbon tax and the loss of company tax reductions overshadow the support for small business and the gains on skills.
In all, the budget has some short term appeal but misses the mark on important structural reforms that would have strengthened the economy and supported the private sector as it shoulders a greater burden in Australia’s economic recovery.
ACCI’s pre budget submission, which outlines some of the reforms that should have been made, can be found at www.acci.asn.au.
For More Information:
ACCI Chief Executive Peter Anderson: 0417 264 862
ACCI Communications Director David Turnbull: 0419 272 802