ACT Chamber

Federal Budget countdown

B2B Editor27 February 2014

Federal Budget countdown

As we swing into Autumn, so do our deliberations for the Federal Budget. The government’s main economic document won’t be announced until 13 May, but right now the Treasurer and his colleagues on the Expenditure Review Committee are deep in consultation deciding spending and policy priorities across all government portfolios. Make no mistake – this document will play a very large part in setting the policy course for the next five years.

The Federal Government has made it clear that it inherited a difficult budget position requiring considerable discipline to put it back on the path to surplus. The mid-year budget update projects that on current policy settings the budget will remain in deficit for the decade. It is clear that policy settings need to change substantially if the budget is to return to surplus. Important to industry is a clear commitment to achieve fiscal sustainability over the course of the economic cycle. Decisive policy action that demonstrates the budget deficit is being addressed will do much to restore business confidence, which is vital for ongoing growth.

A survey of local businesses undertaken by the Chamber during the last election campaign showed that a majority of businesses expect to experience a drop in sales revenue and profitability in the next 12 months highlighting the need for new policies to ease the tough times ahead. In particular, respondents seek action on penalty rates, unfair dismissal laws, work health and safety regulations, BAS paperwork, complexity of tax laws, payroll tax, an inflexible approach by the ATO, automatic interest payment on late payment of invoices by government, a more efficient approach to government tenders, and a public service aware of the needs of small business. A recently released business outlook report by Deloitte Access Economics confirms such sentiments arguing that job growth in the territory has indeed stalled and suggests that with some 6,000 public service jobs to go (with 14,473 job cuts already in the pipeline) from Canberra that 2014 and 2015 will be lean years for the ACT economy.

The most important risk to the ACT economic outlook lies with the fiscal tightening of the Commonwealth Government. If public servant numbers are to be impacted, we are opposed to any political strategy to focus all the pain on the ACT.

We also oppose any political strategy to relocate Canberra-based public servants interstate. One of the reasons for establishing a separate capital in Canberra was to minimise the politicisation of the location of Federal agencies and institutions. We also think there is a strong argument for relocating some interstate Federal agencies to Canberra – such as the 125 Productivity Commission public servants who are currently located in Melbourne. This would be in keeping with the spirit of our constitution and the de-politicisation of the location of Federal agencies and institutions.
We also encourage the Government to consider further outsourcing of government programs to the private and not-for-profit sectors. In a paper prepared by Gary Sturgess, “Diversity and Contestability in the Public Service Economy”, he argues that over the last two decades, governments have opened some of their services to competition and contracting, with research indicating that competition has made a positive difference in the financial performance and productivity of a number of portfolios, including: health, defence, prisons, transport and infrastructure. Research suggests that there is the potential for productivity improvements in the order of 20-25% where services have not previously been exposed to competition. The Chamber submits that the Government should consider extending competition and contracting models in services where it already exists, and applying it to other areas of the public sector – with the Commonwealth Rehabilitation Service, being one such example. The decision to further outsource program delivery will of course be based on the complex mix of social, economic and political considerations.

The new government has shown itself to be willing to examine many areas of major policy importance. Apart from the broad-ranging Commission of Audit, the government has announced or is set to announce major reviews of tax, competition policy, the Australian federation, industrial relations laws, the financial system, agriculture and energy policy. We don’t yet know the outcomes of these analyses, but there is much potential for deep changes over coming years.