Statement by Innes Willox, chief executive of national employer association, the Australian Industry Group
This is a modest budget that will not shift the economic dial, revitalise the private sector or introduce structural reform to an economy that is struggling with poor productivity growth, deteriorating investment and weak consumer sentiment at a time of significant global volatility.
While there are some welcome but restrained proposals to start cutting income tax at the bottom end in 15 months, this unfortunately does not represent actual tax reform or act to eradicate the growing bracket creep which is a major disincentive for Australians to work and earn more.
The budget demonstrates the trough the economy is now in, with another significant downgrade in the growth forecast for the current financial year, down from 2 per cent in last year's budget to 1.5 per cent in this budget. Since December, forecasts for growth, inflation and business investment have been further downgraded while public demand will increase 5 per cent in the year ahead and 3.5 per cent the following year. There is no sign from these forecasts that the private sector is expanding or driving growth.
The fiscal outlook is concerning with a $42.1 billion deficit projected for the next year and a decade of deficits forecast ahead. The fastest growing component of the federal budget is now interest payments on debt, estimated to grow at 9.5 per cent a year. Disappointingly, no clear path back to budget balance is outlined in the budget.
It is notable that the costs of running the public service, outside of the NDIS, have grown by $17 billion in the past year – a 17 per cent increase – with around four in five of the 12,000 new hires being the direct employment of new staff.
For the private sector, the failure to commit to a continuation of the valuable instant asset write-off scheme is alarming. Industry hopes this will be rectified by election announcements in the weeks ahead. The instant asset write-off program operating now has still not been legislated and the uncertainty this causes, as well as new concerns about its future, create significant uncertainty for businesses.
The proposal to abolish non-compete clauses for many workers is also deeply concerning. It will undoubtedly lead to the difficult renegotiation of employment contracts and litigation where employers will seek to protect their intellectual property and customer base built up over years of risk and effort which will now be threatened. This proposal is a disincentive to hire, train and upskill workers.
The time-limited extension of the energy rebate for households and small businesses is welcome. While the rebate may have provided some minor bill relief, it has not assisted with managing the long-term energy affordability and reliability issues that are afflicting households and businesses. It is notable, too, that the end of the rebate indicates that inflation will then jump back up to 3 per cent for the next financial year.
The provision of $3 billion to support the production of green aluminium and iron is welcome as industry continues to invest in decarbonising technologies.
Industry welcomes the extension of the incentive payment program for apprentices from the energy sector to residential construction. However, it is unfortunate this has not been broadened to the manufacturing sector, which is also struggling to attract labour. It is also unfortunate for young Australians that there remains a paucity of apprentice support measures for employers – who do the hiring – to engage and train apprentices.
The provision of additional funding for undefined defence acquisition in a time of intense global uncertainty is, of course, also welcome. However, this still leaves Australia $5 billion short of acquisition forecasts made in 2022. Existing concerns within industry about the pace and structure of the defence acquisition spend will continue, especially with global pressure building for a significant uplift in our national defence budget.
Prior to the budget, industry hoped it would put Australia back on the path to fiscal sustainability, control business cost blowouts, grow private sector employment, boost productivity and begin a process of genuine tax reform.
Sadly, the budget, while containing some commendable individual measures, fails the test of setting up Australia and Australians for prosperity at a time of major domestic and international challenge. There is still time before the upcoming election for these crucial challenges to be addressed.
