Industry gives a thumbs down to Swan's budget
TUESDAY'S federal budget came under attack from all sides yesterday, with critics saying it was short-sighted and denied industry sectors the stimulus they needed.
TUESDAY'S federal budget came under attack from all sides yesterday, with critics saying it was short-sighted and denied industry sectors the stimulus they needed."The government has made a strategic decision to favour a short-term boost to consumption at the expense of the longer-term drivers of economic growth," the Australian Industry Group chief executive, Innes Willox, said.He said while the budgeted surplus for 2012-13 was welcome and would have important national benefits, there were considerable risks in the way it had been achieved."In particular, the additional taxes and costs imposed on industry will undermine the ability of business to make the critical longer-term investments needed to boost productivity, improve our global competitiveness and lift employment," he said.He called the scrapping of the company tax cut that was to be financed from the Minerals Resource Rent Tax a big blow to business, reducing incentives to invest and innovate.The leading retailers said the budget's handouts would not send consumers into stores to buy discretionary goods.The Coles chief executive, Ian McLeod, said funds from the budget, combined with the interest rate cuts delivered by the Reserve Bank, would provide a $7 billion to $8 billion stimulus to consumers, but most would be put into savings or paying down debt. "I am dubious that this will end up in a spending spree."The retail billionaire Solomon Lew said the budget "has more to do with politics than sound economic management".While retail might derive a small benefit from the cash handouts, that effect would be more than offset for retail businesses by "the failure to deliver the company tax cut, the failure to address the GST leakage and competitive consequences of a two-tax regime, which advantages offshore online retailers, and the continuing low level of consumer confidence relating to such issues as the carbon tax and unpredictable government policies such as the NBN project".The businessman Mark Bouris said the budget was good for people on "Struggle Street", but warned there were big assumptions underpinning the funding of the largesse by the Treasurer, Wayne Swan."For families, the cash payments are going to be a good neutraliser for all the expected costs going forward, but that money has to come from somewhere," he said."The big issue is: are the assumptions conservative enough?"While the government had made a call on domestic growth, and while the Reserve Bank was confident of 3.25 per cent growth, the RBA also recognised the external risks of the eurozone crisis. "You need that growth or they won't collect enough revenue for the government to make the payments they are talking about."David Flanagan, of Atlas Iron, said iron ore prices would need to double to hit the federal budget's anticipated $3 billion in its first year."If the iron ore price were to double, I'm pretty sure they'd get their money, but I'm not sure there's too many people that think that will happen," he said."Something that's coming through loud and clear through the mining industry is that our costs are rising, royalties are rising, our superannuation obligations are rising, yet the iron price has fallen and the currency has gone the wrong way."Tony Haggarty, the chief executive of Australia's largest independent coal company, Whitehaven Coal, said: "There's a real risk, and I think we're seeing it now, that companies are seriously looking at what's going on in Australia and saying this is getting way out of kilter and there are better places to invest."Property industry investors and peak bodies said the budget provided little joy for the sector at a time when the country was not appearing to be as stable and attractive an investment destination as it once was.They said the move to double the withholding tax to 15 per cent was a disincentive to foreign investors, and the scrapping of the green building incentive would harm the construction sector.The Property Council of Australia chief executive, Peter Verwer, called the Gillard government's budget one of "missed opportunities and misdirected policies"."The government has done virtually nothing to leverage productivity growth and greater liveability from the cities that generate 80 per cent of the nation's wealth," he said.