May’s Budget a chance for Government to show commitment to spending restraint
The Federal Government must use May’s Budget to demonstrate it remains committed to reducing government spending as a share of the economy or else we risk consigning future generations to the painful readjustments that have taken place in southern Europe, the Australian Chamber of Commerce and Industry said today.
The Australian Chamber has released its Pre-Budget Submission, which outlines a series of reforms that can curb runaway spending in areas including the age pension, family tax benefits and childcare.
Kate Carnell AO, CEO of the Australian Chamber, said: “Unless public spending is brought under control, the Australian economy will gradually be crippled by increasing taxes and growing public debt, both of which are unsustainable.
“Given welfare and social services will account for 60 per cent of total government sector spending this year, they provide numerous changes worth considering.
“Changes to the Age Pension could foster innovative financing solutions that guarantee that pensioners can remain in their homes and still save billions of dollars from spending.
“The Government should consider transforming pension payments to owner-occupiers into a loan that is recoverable against their property when it is sold, potentially with a residual value that would allow pensioners to access equity for other purposes, such as aged care. While retirees should be able to maintain a minimum residual value, at present very little of the equity in owner-occupied housing is being drawn down for other purposes.
“In addition, abolishing Family Tax Benefit Part B could save $13.9 billion over four years and means testing the Child Care Rebate could save $250 million per year.
“Public spending growth cannot exceed economic growth indefinitely. If spending continues to grow faster than the economy, we will need to continuously raise the tax burden. If Australia waits until the system breaks we will consign the next generation to readjustments like those implemented recently in Greece and Spain.
“Community support is vital to fixing this spending problem. Early action gives the Government more time to phase in changes through grandfathering and delayed commencement. Focusing on delivering outcomes more efficiently rather than reducing services or shifting costs will also make reform easier.
“However, the public must also understand that government’s ability to pay for services is tied to national income.
“Controlling public spending can boost economic growth. These deficits mark a clear departure from the discipline of earlier decades, putting upward pressure on borrowing costs and constraining the ability of the private sector to access capital.
“These reforms are not easy, but doing nothing is not an option. We look forward to Treasurer Scott Morrison and other ministers giving serious consideration to these proposals.
“Of course, fiscal consolidation in the budget must come alongside a broader economic reform agenda, including changes to tax, regulation, workplace relations, infrastructure, trade, education and training, and tourism.”
The Pre-Budget Submission is available on the Australian Chamber website.