Australia Needs More Fed Gov't Spending -- AI Group

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By Christine Gaylican | February 10, 2014 9:00 PM EST

The Australian Industry Group has urged the federal government to put on enough spending so as not to derail the economy now reeling from weak revenues from the mining sector.

Reuters
The Australian High Court has rejected the challenge of the mining tax’s validity led by Andrew Forrest’s Fortescue Metals. Aside from raising negligible revenue, the imposition of the minerals resource rent tax has upset miners who argued that they are already paying royalties to state governments including income tax to the federal government.

While the substantial fiscal policy challenge over the rest of this decade is to move federal, state and territory budgets out of structural deficit positions, the reality is the economy at present is very unlikely to withstand big aggregate spending cuts or tax increases in 2014-15 without provoking slower growth and lower revenue collections, AI Group Chief Executive Innes Willox said in a statement.

Mr. Willox noted that a weakening economy is therefore clearly not the time for deep program cuts and the key to the Budget's success will be how well it addresses the fiscal policy challenges while lifting confidence across the economy.

"Indeed, industry is looking to the Federal Government's first Budget to encourage and facilitate the efforts of large sectors of the economy as they undergo transition and adapt to the winding down of the mining boom," he added.

Australia, according to the AI Group, needs a more balanced and diversified economy the face commodity price fluctuations and shifts in demand for resource and energy commodities in resource-driven countries like China.

Mr. Willox said that this requires proactive policies that encourage and facilitate business efforts in innovation, the development of business capabilities and workforce development.

"In short, focus needs to be on not just consolidating the Budget over coming years but also on measures that will lift our productivity and competitiveness. Done correctly, this will ultimately help the fiscal consolidation objective by growing the tax base and assisting the recovery in tax revenues.

"To this end, Ai Group is seeking action in a number of key policy areas including:

  • Skills - retain the National Workforce Development Fund (NWDF) or similar enterprise based co-contribution fund to upskill existing workers; provide an additional 3% funding to the annual VET budget to 2025 to support the attainment of COAG determined targets; implement a genuine national approach to apprenticeships by establishing a National Apprenticeship commission or similar entity; significantly expand funding allocation for English literacy programmes for existing workers as well as focus on improving literacy as well Science, Technology Maths and Engineering (STEM) skills in our school system.
  • Business innovation and capability - ensure the Government's announcement of Strategic Growth Action Agendas aimed at lifting industry competiveness and capabilities are adequately funded; support ongoing funding to Cooperative Research Centres Program and Industry Innovation Precincts and other important collaboration between research institutions and industry.
  • Environment and energy - provide certainty to industry on Emissions Reduction Fund funding availability; encourage the Government to remove Energy Efficiency Opportunities burdensome reporting obligations following the removal of funding.
  • Infrastructure - consider and where appropriate act on the recommendations made by the current Productivity Commission inquiry into the Public Infrastructure costs; ensure Infrastructure Australia undertakes thorough cost-benefit analysis of all its infrastructure spend; encourage the Government to partner with private sector where appropriate to build and/or operate infrastructure; reconsider the onerous tendering requirements it places on construction firms.
  • Defence - over the next decade increase the Defence budget to 2% of GDP, up from the current 70-year low of 1.59% of GDP; restore confidence to Australia's defence industry including securing the future of Australian naval shipbuilding and committing to the Future Submarine Program, Joint Strike Fighter Program and new armoured vehicle capabilities.
  • Immigration - Increase the migration planning level for 2014-15 from 190,000 to 220,000, with a sharper focus on lifting the proportion of the program devoted to skilled migration.

"There are other important non-budgetary policy areas that are also critical to improved productivity and competitiveness. These include improving workplace relations to remove inflexibilities and undertaking measures to reduce the stifling red and green tape burdens on Australian businesses," Mr Willox said.

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(Photo: Reuters / )
The Australian High Court has rejected the challenge of the mining tax’s validity led by Andrew Forrest’s Fortescue Metals. Aside from raising negligible revenue, the imposition of the minerals resource rent tax has upset miners who argued that they are already paying royalties to state governments including income tax to the federal government.
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