The Business Council of Australia (BCA) is against the use of taxpayers' money to bailout weak industries such even if such a move has the potential of saving jobs.
The submission by the BCA to the federal government's 2012-13 budget came at a time that several Australian companies announced plans to axe jobs due to the high Australian dollar and weak consumer confidence.
"The government needs to continue to firmly resist calls for protectionist reversion.... Special assistance programmes to prevent those job losses will obstruct economic transformation," the BCA said.
By allowing job losses in industries with slow or no growth, structural changes would also take place in the Australian economy, the council argued. In lieu of financial assistance, the BCA recommended more appropriate policies for displaced workers such as relocation assistance and training.
The council also sought a return to a budget surplus in 2012, review of fiscal policies and establishment of new medium-term fiscal policy settings to manage future risks. It favoured the creation of a $40-billion emergency stimulus fund as a safeguard against future economic crises and to prevent another budget deficit.
The fund would be used to make three one-off payments equal to per cent of Australia's gross domestic product once every 13 years.
"We want the federal government to put aside money for a rainy day once public debt has been paid down.... Past experience, including Australia's success in weathering the global financial crisis, has shown that discretionary fiscal policy is most effective when deployed at times of major economic shocks and when that shock cannot be managed through monetary policy alone," The Australian quoted BCA President Tony Shepherd.
The proposed fund would be about 55 per cent the size of the Future Fund, but the council said it should be managed independently of the Future Fund. The BCA suggested the money be managed by the Australian Office of Financial Management which would invest it only in short-term debt or cash.
At the height of the global financial crisis, the Rudd government initiated a fiscal stimulus equivalent to 4.6 per cent of Australia's GDP in 2009 which was the third-largest fiscal stimulus in the world.
"The government should not find itself in the position of having to implement a dramatic fiscal consolidation after stimulus had been applied," the BCA said.
Among the Australian companies that announced job losses last week were summer wear manufacturer Billabong and Pacific Brands. Since the start of February, major Aussie firms have started to lay off workers. The list includes BHP Billiton, Holden, Toyota, Thales, Reckitt Benckiser, Manildra, ANZ Bank and Westpac. Caltex and Alcoa are undertaking reviews which may also result in axing of hundreds of jobs and reverse the slower growth of unemployment in Australia which stood at 5.1 per cent in January 2012.