THE Mid-Year Economic and Fiscal Outlook confirms Australia has deep structural budget challenges, revealing an expected 13.5 per cent fall in the terms of trade and projected deficit of $40 billion, according to BCA President Catherine Livingstone (pictured).
She says intergenerational pressures are upon us, requiring fiscal challenges to be addressed in conjunction with a concerted strategy to grow the economy.
"In the face of declining revenue and significant debt, the government has made the right call to continue to support economic growth by avoiding ad hoc tax decisions or spending cuts," she says.
"The priority in balancing the budget is to control the growth in public spending."
She says major programs need to be redesigned in the near term according to a consistent policy framework, followed by a carefully managed transition plan which engages the community.
"We need the right people around the table to design more coherent and effective spending decisions that do not risk unintended consequences for the most vulnerable people in the community," she says.
"It is important to restate why having a balanced budget matters. It makes us resilient to future economic shocks, and supports and sustains quality services and an adequate social safety net.
"A balanced budget also gives us the capacity to reinvest in the skills, infrastructure and innovation system that will grow the economy."
Livingstone says the government's perspective of strengthening the economy is encouraging, but to achieve growth will require a commitment to purposeful and deliberate policy frameworks which are consistent over time.
She says in this context, the government's Industry Innovation and Competitiveness Agenda is a helpful approach. The agenda includes investment in physical and knowledge infrastructure and skills, which will support innovation and the diversification of the economy.
"Recently negotiated free trade agreements will also contribute to growth, but only if government and business work together to secure the anticipated benefits of these agreements," she says.
"A strong and growing economy increases revenues, create jobs and maintains living standards."
Looking forward, Livingstons says we must work together as a country to make the tax system more competitive, the federation more workable, workplaces more flexible and to improve our education and training systems to equip people for a digital economy.
"This is huge program of policy change that will require extensive consultation to ensure that we achieve the necessary policy frameworks as quickly as possible," she says.
"This program must have the support of all political parties and all parliamentarians, including those who serve in the Senate.
"However, we should make no mistake, Australia cannot maintain living standards without a strong budget. We have no choice but to map out a clear transition to bring our fiscal circumstances under control.
"We need national resolution around this task in the national interest and as a matter of urgency."
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