The Business Council of Australia has warned if the economy is allowed to just ‘muddle along’ the nation will be laden with an extra $50 billion of debt every year.
In a new report released ahead of next Tuesday’s federal budget, it says without stronger growth, Australia will sleepwalk into a state of widening deficits, lower living standards and a heightened vulnerability to economic shocks.
‘Avoiding the hard calls doesn’t just kick the can down the road, it leaves all Australians with fewer and even more difficult decisions into the future,’ the council’s chief executive Jennifer Westacott said releasing the report, Economic Realities, Budget Choices for a Strong Australia.
While it welcomes the forecast return to surplus in 2020/21 after 12 years in deficit, longer-term spending pressures including from an ageing population continue to build.
It points out the 2018/19 budget will rely on a sharp increase in revenue to drive an improvement when the budget otherwise faces resistance to even modest spending changes in the parliament.
The report calculates if economic growth was averaging 3.5 per cent a year over the next few decades, average incomes would be around $160,000 in today’s dollars and tax revenues would be some $290 billion higher than projected in the most recent Intergenerational Report.
However, if economic growth were to remain around its current rate of around 2.5 per cent a year, then the budget deficit would blow out to more than $140 billion by 2054/55, tax revenues would be $100 billion lower and incomes would be some $14,000 less.
‘We need to increase growth if we are to deliver a strong economy and ensure Australians can have better-paying jobs, and the ability to provide for and protect their families,’ Ms Westacott said.
‘We’ll need to see a budget on Tuesday night that tackles the key problems.’
BUSINESS COUNCIL POINTS TO KEY AREAS TO DELIVER STRONG ECONOMY:
– Competitive tax settings
– Efficient regulation and productive workplaces
– Competitive and reliable energy
– Efficient infrastructure
– A skilled workforce
– An open, outward-looking economy.