Forget the surplus, BCA tells Labor
If Labor accedes to the demand it would mean the major parties go to the election without fully revealing where spending cuts could hit over the next three years. But Business Council of Australia chief executive Jennifer Westacott said voters should be even more worried about "poorly thought-through savings and knee-jerk reactions" than future unspecified spending cuts.
The Coalition has attacked Labor for abandoning its promise to deliver a surplus in this year's budget, but in its annual budget submission the BCA urged the government not to try to deliver a surplus next year either.
It said Labor should deliver a convincing plan to get back to surplus within three years and to then deliver consistent surpluses of between 1 per cent and 2 per cent of gross domestic product.
The BCA is also calling for a "new set of fiscal rules" including a "hard cap" on growth in spending of 23.7 per cent of GDP or below, and setting aside money to pay for stimuli that might be needed to get through future global economic turmoil and to pay for the cost of the ageing population.
The submission comes as figures released by the Bureau of Statistics on Tuesday showed consumption spending by all levels of government fell another 0.2 per cent in the December quarter. This followed a 1 per cent decline in the September quarter.
Ms Westacott said a surplus next year was unlikely to be achievable because "it is difficult to see what structural savings you could make in that time frame ... those kinds of savings can't take full effect quickly".
She said the BCA would like to see the government set out "what percentage of revenue they believe they can pare back each year" and while specific long-term savings would be "welcomed", she said: "We certainly don't want another knee-jerk promise to get back to surplus next year ... the task is to reset the fiscal strategy rather than produce a list of savings."
Rather than being concerned that the extent and targets of spending cuts might not be known on election day, Ms Westacott said "what voters have to be concerned about in this election campaign is that there is no firepower in the budget to pay for things" such as Labor's Gonski education reforms, or the disability reforms, or crucial economic infrastructure, or the looming costs of an ageing population.
She accused the government of "budgeting by wishful thinking, estimating revenue and tax receipts and then spending the money before it is actually there". The BCA submission cites a Deloitte Access Economics review that found the government had committed to $49 billion in new spending over the present forward estimates.
But that is a gross figure, counting for example all the tax cuts and compensation spending associated with the carbon tax but not calculating the revenue the carbon tax raises. The BCA did not nominate a net figure for new discretionary spending.
It also criticised Labor for poor-quality, illusory savings - calculating that more than half of the $28 billion in "savings" claimed in last year's mid-year economic statement were in fact just "timing shifts" of revenue brought forward or spending deferred.
Ms Westacott said lasting savings could be found by rethinking the roles of state and federal governments, and by reining in the growth of family payments, a task the Gillard government had begun and for which it should be "given credit".
Frequently Asked Questions about this Article…
The BCA urged Labor not to try to deliver a surplus next year, saying it is unlikely to be achievable. Instead the BCA wants a convincing plan to return to surplus within three years and then deliver consistent surpluses of about 1–2% of GDP.
The BCA says a post‑election spending audit would avoid poorly thought‑through savings and knee‑jerk reactions. It argues the priority should be to reset the fiscal strategy rather than rush to hit a surplus target next year without durable savings.
The BCA recommends a new set of fiscal rules, including a ‘hard cap’ on growth in spending at 23.7% of GDP or below, and putting aside money to pay for future stimulus needs and the costs of an ageing population.
The BCA says much of last year’s claimed $28 billion in savings were illusory—more than half were timing shifts (bringing revenue forward or deferring spending) rather than lasting structural savings.
The Deloitte Access Economics review cited by the BCA found the government had committed to $49 billion in new spending over the present forward estimates. The BCA noted this is a gross figure that counts tax cuts and compensation without offsetting revenue such as from the carbon tax, and it did not nominate a net discretionary spending figure.
The BCA warned there appears to be no budget 'firepower' to pay for initiatives such as Labor’s Gonski education reforms, disability reforms, crucial economic infrastructure, or the looming costs of an ageing population without a clearer fiscal plan.
The BCA cited ABS figures showing consumption spending by all levels of government fell another 0.2% in the December quarter, following a 1.0% decline in the September quarter, highlighting constrained government demand in recent quarters.
The BCA suggests lasting savings could come from rethinking the roles of state and federal governments and reining in the growth of family payments—measures the article says the Gillard government had begun and should be credited for.
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