Each year, the BCA makes a submission to the federal budget process to support the government of the day to formulate a budget that takes account of Australia's medium, as well as short-term, wellbeing.
Last year’s Budget correctly continued the process of fiscal consolidation to shore up the sustainability of Australia’s public finances while investing in productive capacity including a significant workforce package and further infrastructure-related measures. We believe the 2012–13 Budget could be a watershed for Australia. But it will need to do more than maintain the same path. Further steps can and should be taken now to strengthen our fiscal policy foundations.
The test of this year’s Budget will be the extent to which the government can outline a pathway to fiscal discipline that is credible and supported by an institutional framework that provides confidence that fiscal goals will continue to be achieved.
A strong first step on this path would be to return the Budget to surplus in 2012–13, recognising that the government should have some flexibility and discretion to alter this path if there is a marked deterioration in the global economy arising from a significant downturn in the Euro area. However, planning should be occurring now to ensure that in those circumstances, any stimulus is effective and well directed in both boosting demand and enhancing Australia’s productive capabilities.