Federal Budget lacks policy consistency

Tuesday 10 May, 2011 | Tags: State and Federal Budgets

Statement by David Goodwin, CCIQ President

Tonight's Federal Budget is an exercise in 'trust us' yet this budget is one responding to political fortunes as opposed to the needs of the Australian economy.

There are many aspects of the Federal Budget that are on the right track but at the same time its policy consistency remains difficult to comprehend.

Returning the budget to surplus supports jobs and business during an uneven economic recovery, particularly for Queensland.  Without the budget returning to surplus and implementing tighter fiscal policy, the Reserve Bank will raise interest rates that will hurt a non-resource sector recovery.

CCIQ is concerned that the economic growth rates that premise forthcoming revenue receipts do not factor in a Carbon Tax that will significantly detract from actual growth which will in turn lower receipts and the ability to return the budget to surplus.

The Government will accordingly need to resist the temptation to increase other taxes.  However the Carbon Tax, Minerals Resource Rent Tax (MRRT) and the Flood Levy give cause to be highly concerned in this area across the next two financial years.

At present this Federal Government could easily be regarded as a one trick pony relying almost exclusively on the resources sector to balance the books.  Future budgets must ensure Australia embraces a balanced and diversified economy that is not overly reliant on resource exports to a handful of countries.

The key to diversification continues to lie in supporting all business to grow and employ. With this in mind the Carbon Tax, MRRT and increasing Superannuation from 9% to 12% will spell the death knell for many businesses.

In the meantime raising productivity through better infrastructure and workforce expansion is of critical importance. Investing in economic infrastructure such as a second crossing for the Toowoomba rang and flood proofing the Bruce Highway are high on the CCIQ wish list. Unfortunately only partial progress for the Bruce Highway has been included in this Budget which is a blow for better facilitating our resource to market.

Where this Federal Budget does make considerable progress is forcing otherwise long term unemployed to work, the 'Building Australia Workforce initiative, increasing skilled migration to the regions and assisting businesses to access major resource project opportunities.

However it is hard to fully recognise the promising features of this Federal Budget when too many of fundamental policies impacting on business or about to be unleashed on business are so glaringly out of step. If you were to test the business community over whether the Federal Government has in fact made the 'hard decisions' needed for future prosperity the answer would be 'not yet'.

Read CCIQ's commentary on the Federal Budget 2011