"With the Australian economy in its longest period of low growth since the early 1990s recession, the 2025-26 Federal Budget must make fiscally sustainable choices to restore growth and resilience in the private sector," said Innes Willox, Chief Executive of the national employer association, the Australian Industry Group.
"Rapid increases in spending by both Commonwealth and state governments have provided Australia an economic lifeline over the last two years. With much of the private sector facing very weak conditions, this stimulus proved critical in staving off the risk of recession.
"However, Australian governments cannot spend our way out of trouble forever. Rising tax burdens and the forecast decade of fiscal deficits ahead are simply unsustainable. It is imperative that the private sector engine of growth is restarted immediately," Mr Willox said.
The Australian Industry Group has identified five steps which this year's federal budget should make to help restore growth conditions in Australia's private sector:
- Cost pressures on business must be brought under proper control. Surging input and wages costs have weighed on business margins, weakening their global competitiveness and capacity for new investment. The budget should make inflation and cost control a central objective.
- Fiscal sustainability must be restored to our public finances. Managing the structural deficits resulting from surging government spending will eventually necessitate either material cuts to key public services, an increase in taxes, and/or growing levels of public debt. There is an urgent need to bring the future path of public spending back to a sustainable long-term level.
- The private sector labour market has weakened considerably, with government-supported industries accounting for four out of five new jobs created in 2024. Fiscal conditions do not allow this public-private imbalance to continue indefinitely. The budget should include measures to return private sector employment generation to normal conditions of health.
- Australia has enjoyed no growth in overall productivity in the five years since the pandemic, with clusters of weak performance in the non-market sector dragging performance down. As productivity is the ultimate wellspring of national wealth, this will affect all Australians. Productivity-enhancing regulatory reforms should be pursued to put all industries on a footing for productivity and growth.
- Successive federal budgets have tinkered around the edges of tax and failed to make genuine and impactful reforms. With our economy weak and global headwinds mounting, now is the time for serious reforms. Settings should be adjusted to deliver a tax system which is competitive, simple and productivity enhancing.
Read the Australian Industry Group's pre-budget submission here
