Budget needs ‘bigger buffer’ to get through tougher times on the horizon

Ross Greenwood speaks to CEO of the Australian Chamber of Commerce and Industry, James Pearson, who says this budget focuses on growth in tax receipts and money coming in rather than cutting spending.

Introduction: Budget needs ‘bigger buffer’ to get through tougher times on the horizon

Ross Greenwood: Coming up very shortly on Money News, Kelly O’Dwyer, the Minister for Revenue and Financial Services. We’ll talk to her about changes to superannuation in the budget, but also maybe even have a chat to her about that Commonwealth Bank penalty as well, not a fine, but a penalty in that particular case. Now, on the idea of the budget, just a reaction to it.

Now you can see this largely in some of the ratings agencies. Fitch, for example, which reconfirmed Australia’s triple A credit rating back on A1 ahead of the budget says effectively, they are seeing most things coming out of the budget as they would have imagined. They’re saying the budget is based on optimistic revenue assumptions however. The reliance on improved revenues rather than policy proposals to narrow the deficit poses some downside risk is what they say.

S&P Global Ratings, we’ve spoken with them again, continues to say that Australia has a negative outlook on its triple A credit rating according to S&P Global Ratings. It basically says that the global trade tensions coupled with rising investor aversions to emerging markets in recent months may dampen economic growth among Australia’s key trading partners. As such, risks to the government’s plan for an early return to budget surpluses are significant. Another person who’s expressed caution is James Pearson who is the chief executive of the Australian Chamber of Commerce and Industry. He’s on the line right now. Many thanks for your time, James.

Interview with: James Pearson, CEO, ACCI

James Pearson: Good evening, Ross.

Ross Greenwood:  James, you’re saying that they’re going in the right direction which is what the ratings agencies are saying, but you’re saying they need to be more ambitious in what they’re trying to achieve. What sort of things are you talking about?

James Pearson: Well, look, as you said, and as the rating agencies have said, there’s this reliance on growth in tax receipts in money coming in, rather than doing as much as we think they should be doing in terms of controlling, in terms of cutting back on spending. That’s what we think should be done. Look, we think that this–

Ross Greenwood:  What sort of things are you talking about there? What specific things do you think they can do to cut back on spending because you know that if they try and cut family tax benefits, if they try and tax, cut a range of different options, chances are they would not be reelected and that would be a fundamental issue for them.

James Pearson: Well, that would concentrate the of any politician, wouldn’t it? Look, there’s some very big areas of spending by the government. Areas like defence, health, education, social security. Now, these are all important for national security, for the well-being of the community and to help those who are in most need, but because they’re very big areas of public expenditure, they’re complicated.

From my experience working both in government and in companies, large and small, there’s always the opportunity to find efficiencies. There’s always going to be waste if you look hard enough. We’ve been calling for the government to put in place what we call efficiency boards, bringing outside experts to run the rule or run their eyes over spending in these big-spending complex areas where taxpayers’ money is being spent and eliminate the waste, get more efficiencies, that’d be a great start.

Ross Greenwood:  Okay. The Treasurer, when I spoke with him last night, said well, they’re doing a lot of that stuff. They are curbing the spending and for every new expenditure measure, they will put in place a savings measure somewhere through the budget, that he doesn’t want the level of government spending to be skyrocketing beyond 25%, that he wants to bring it back clearly in line with the taxation target of 23.9% because that’s ultimately the only way you can balance the budget and get back into surplus. Is that not enough for you?

James Pearson: Well, that’s a great start and that’s why we’re happy to say that this budget is heading in the right direction. Look, I ought to really need to make the point too that there’s some good things for business in there like for example, the extension of the instant asset write-off for small businesses. We’d like to see that made permanent because it’s a very popular and it does what it’s intended to do and that is stimulate small businesses, encourage them to invest and of course extend the business tax cuts to larger companies because smaller businesses as well as big businesses will benefit.

Ross Greenwood:  What about this idea of greater connectivity between cities in regional Australia, which is something that you had called for. There’s going to be a big, big investment into in particular, rail and road projects.

James Pearson: Well, that’s right. It’s good to see that infrastructure investment. In fact, one important things from our point of view because we represent largely small and medium-sized enterprises right around the country, including in the big capital cities is, look, you should have the ability to run a profitable business and not depend on being in the CBD of Sydney or Melbourne.

You should be able to live outside one of the major population centers and still have a great prospect of a really good job. Run a business, have a good job and get to work and it’ll not take too much time. I think that the investment across the country, including in capital cities, but not just there, is a good thing. Back to what you were saying the Treasurer has said, absolutely. It’s good that they’ve got a target of getting their overall spending down under 25% of GDP. That’s in answer to our call to do that. It’s good that they’ve identified a cap on the amount of tax they’ll take from the community, from individuals, and from businesses as a percentage of GDP.

We’d like them to go further and the reason, Ross, is this, we do live in an uncertain world, things are pretty good at the moment. That’s great. We know there’s a lot of uncertainty politically, economically internationally. Look, we also know that governments these days in Australia tend to have thin margins and they tend to face hostile senates. That all adds up to a lot of uncertainty and a buffer is needed. We’d like to see a bigger buffer in the budget to get us through those rainy days because they will come at some stage.

Ross Greenwood:  James Pearson is the chief executive of the Australian Chamber of Commerce and Industry. As you hear him say, representing many of the small and medium-sized businesses in Australia, whereas say, the Business Council of Australia represents the top 100 listed companies on the ASX. James, we appreciate your time here on the program.



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Money Minute – November 21 2017 Who Pays for Tax Cuts? .

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Image source: 2GB

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