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Australian Industry Group Releases Budget Wishlist

by Mary Swire, Tax-News.com, Hong Kong

25 March 2008

Against the most uncertain economic backdrop that the country has faced for many years, Australian industry is calling on the recently-installed Labour government to reduce the corporate tax burden when it announces its first budget in May.

"Much is at stake in the success of the May Federal Budget for business, the economy and the community as a whole," Australian Industry Group (Ai Group) Chief Executive Heather Ridout stated in the organisation's pre budget submission.

She added:

"The Budget is being put together in the most difficult economic circumstances for at least a decade, with accumulating global uncertainties and an inflationary domestic economy in which strong demand is being fuelled by record commodity prices combined with a lack of domestic productive capacity.

"These tough economic conditions put pressure on this Budget to really deliver policy coherence and direction."

The Ai Group submission has proposed a Federal Budget that builds domestic productive capacity and supports the competitiveness and globalisation of industry, encourages and facilitates adjustment to the carbon constrained economy, boosts future retirement incomes of low-income earners, and ensures domestic inflationary pressures are contained.

Among the key initiatives proposed by Ai Group, which represents a broad spectrum of industry in manufacturing, construction, logistics, health, ICT, labour hire and other business services, are proposals to:

  • Deliver promised personal income tax cuts in full;
  • Kick-start business efforts to adjust to the impacts of climate change policies, including through a phased reduction in the company tax rate to 25% by 2010.
  • Increase the adequacy of superannuation for low-income earners in part by refunding into the superannuation accounts of low-income people an equivalent of the 15% tax on compulsory employer contributions; and
  • Make broad cuts in government expenditure while maintaining programs needed to expand capacity and competitiveness. Ai Group proposes a two-pronged approach - there should be a generalised reduction in expenditure based on concerted improvements in productivity across all portfolios and agencies and there should be a selective identification of unnecessary spending commitments.

"The income tax cuts will assist in expanding capacity by stimulating workforce participation and they will help in containing wage pressures. Nevertheless they need to be accompanied by substantial cuts in expenditure," Ridout argued.

She continued:

"Considering the steady increases in expenditure in real terms in recent years, there is plenty of scope to achieve these reductions. Further, there is considerable political support for expenditure cuts making now the ideal time for the government to make inroads into the growth of government outlays.

"Ai Group believes the Budget should also be used to kick-start the process of preparing the economy for the adjustments required as we respond to climate change.

"Australian business wants to be part of a global solution to the threats posed by climate change and supports progress on giving shape to a domestic Emissions Trading Scheme. However, the Scheme will leave many businesses and their employees in trade-exposed industries operating at a disadvantage relative to competitors abroad and it will require a massive investment effort by the business community as products and processes are re-evaluated and re-engineered.

Ridout concluded:

"Budgetary initiatives should be complemented by a range of capacity-expanding non-Budgetary policies and through carefully targeted reductions in overall expenditure. A leading priority is to accelerate regulatory reform both at the level of the Commonwealth itself and by the states and territories. Managing risks by keeping critical areas such as wages and industrial disputation in check is also essential."

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