Ordinarily the Opposition Leader’s Budget Reply is something only hard-core budget fans get excited about. But its proximity to an election has rebadged tonight’s speech as a spectator sport, according to Australia’s leading professional accounting organisation, CPA Australia.
“If elected, a Labor government will take the reins in arguably the most torrid economic conditions since the seventies,” said General Manager Dr Jane Rennie. “This requires an economic approach which maintains sufficient flexibility to respond to once-in-a-lifetime crises, like war in Ukraine and COVID-19.
“Tuesday’s budget was short, sharp, temporary and targeted, reflecting prevailing economic conditions. By contrast, the Budget Reply doesn’t seem to fully acknowledge the challenges and impacts of the last two years and draws on solutions from a pre-COVID age.
“In the end, the Budget Reply really only provides a ‘back of the envelope’ sketch of Labor’s economic approach. This doesn’t give Australians a complete picture of the Opposition’s policies leading into the election.”
Fiscal policy approach
“The challenge for whomever forms the next government, and our greatest hope, is to implement fiscal policy that promotes long-term economic transformation.
“At first blush, it appears Labor is proposing a large increase in recurrent spending. By comparison, Tuesday’s budget was more skewed towards temporary support for business growth. Without as much being said, it’s apparent the Opposition is rejecting austerity, as has the government, which we regard as sensible at this time.
“Dollar figures are not provided for many of the Opposition’s proposed measures. However, from the high-level detail the entire bundle looks very expensive. If each of the initiatives in the speech were implemented, the fiscal balance could tilt too far the other way.”
Cost of living
“There’s a strong emphasis on wage growth as a solution to cost-of-living pressures. In an inflationary environment, this puts the Opposition in somewhat of a bind. Without productivity improvements, wage growth will only fuel inflationary pressure. The Opposition flagged that it would work with business on boosting productivity, which is promising. However, the speech is light on details.”
Support for small business
“Disappointingly, small business was barely mentioned in the Budget Reply. Small businesses are incredibly important to Australia’s economy. They make up around 98 per cent of all Australian businesses, employ over 40 per cent of the domestic workforce and contribute the equivalent of one-third of Australia’s GDP. We encourage the Opposition to let Australians know how it intends to support the small business sector.
“Tuesday’s budget committed substantial funding to the new Technology Investment Boost and Skills and Training Boost. These are incredibly important for business investment. Neither was mentioned in the Budget Reply, which may leave businesses wondering if they should proceed with technology purchases. The Opposition should clarify whether it will support these programs if it forms government.”
Labour and skills shortages
“Promisingly, the Opposition Leader indicated there would be more university places under a Labor Government. The accounting profession is currently experiencing acute skills shortages. In the longer-term, this investment could alleviate these shortages, but won’t do much now.”
A second budget
“Ahead of the Budget Reply, Shadow Treasurer Jim Chalmers said there would be a second budget before the end of the year if Labor won government. In reality, it’d be more of a mini-budget or budget update than a new budget. Once the appropriation bills are passed, the lion’s share of budget measures is fixed.
“There is some limited scope for Labor to move the budgetary chess pieces around if it wins government. The risk in all of this is that it creates a high degree of uncertainty, for programs of work and the people and businesses involved. To foster transparency, we encourage the Opposition to clarify which measures it would change during their election campaign.”
Dr Jane Rennie, General Manager External Affairs on +61 425 869 017 or email: [email protected]
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