Budget fails to solve productivity issues, industry groups say

The nation’s peak industry bodies have welcomed the Federal budget’s initiatives but said it does not go far enough in addressing Australia’s structural productivity problems.

The Ai Group, Business Council of Australia, and the Australian Chamber of Commerce and Industry have warned that while the budget is a positive first step it did not act strongly enough yet to meet the upcoming economic challenges.

AiGroup Chief Executive Innes Willox said despite a number of welcome commitments by the budget, particularly around the energy transition and gas supply monitoring, it is merely “treading water as global economic storms approach”.

“Today’s federal budget risks tinkering at the edges of Australia’s structural economic challenges at a time when the domestic and global economies are under significant stress,” Willox said.

“The Government’s acknowledgement that low productivity has become entrenched calls for a bolder and broader policy agenda.

“The question is whether the budget does enough to fortify the economy against these structural challenges, by boosting productivity, curtailing spending and supporting business and household confidence. More could have been done to propel the economy through these challenging times.”

He said the proposed National Reconstruction fund showed promise, but its development must be carried out collaboratively with business, noting that programs cut weakened industry.

“While initial funding has been allocated for a National Reconstruction Fund, its role and purpose is still to be determined. Industry looks forward to participating in consultations on its establishment. However, cuts to a range of industry development programs including the successful Entrepreneurs Programme is disappointing.

Willox said the Productivity Commission’s five-yearly review should provide the platform for an improved policy response in overcoming the nation’s low productivity in next year’s budget.

The proposed changes to workplace laws, giving unions the powers to make enterprise agreements that cover multiple employers within an industry, remained a concern for Willox, who said they remained high-risk proposals.

“The government’s proposed workplace relations reforms will do little to lift productivity which is the foundation for sustainable foundation for real incomes growth, employment generation and business confidence,” he said.

The Business Council of Australia said this budget was a positive initial move towards building national resilience, but the budget needed to ‘pull out all stops’ to drive productivity.

“Our biggest challenge will come in the next three years, and we must do the hard work of reform to drive growth, productivity and restore the national credit card,” BCA chief executive Jennifer Westacott said.

“We are facing a herculean set of challenges, the task ahead is enormous. Productivity growth over the last decade was the worst in six decades; the budget does little to tackle this problem.

“It is now time to pull out all stops to drive productivity, innovation, dynamism and job creation. We can’t wait for the May Budget to turn this around.”

The Australian Chamber of Commerce and Industry, however, was predominately in favour of the budget’s measures but concurred that it has not addressed the structural issues facing businesses.

“This budget covers the essential elements of economic management and tackling growing cost pressures. However, longer-term structural challenges that threaten to hold us back will need continued, and rigorous, attention.

“As the budget warns, we cannot afford to be complacent against the global headwinds of severe inflationary pressures, climbing interest rates and soaring energy prices.

“Whilst this budget takes a first step towards fiscal repair, long-term challenges remain considerable.”