Federal Budget 2024 Prudent choices needed today for economic success tomorrow

“With the Australian economy in such a volatile and delicate state, the 2024-25 Federal Budget needs to make prudent choices that avoid unnecessarily prolonging our inflationary pain,” Innes Willox Chief Executive of the national employer association Ai Group said today.

“Strong post-pandemic growth has already stalled, and forecasts indicate near-term conditions will be some of the poorest in several decades.

“In this environment, a restrained approach to short-term spending should be matched with longer-term groundwork to build productivity, skills, innovation and industrial development. Cost-of-living measures should be carefully targeted to those households that most need support.

“Inflation has proven to be surprisingly persistent and is now primarily homemade. It needs to be treated as our leading near-term challenge. Higher-for-longer inflation means higher-for-longer interest rates, and therefore slower-for-longer growth. Overall fiscal settings should work with rather than against monetary policy.

“We face an inflationary shortage of housing. The labour market is weakening from its tightest levels in a generation, and many industries face significant vulnerabilities. National productivity performance is poor even by recent weak standards. R&D spending and foreign investment inflows are at their lowest levels in decades.

“Our ambitions and targets for a significant uplift in housing need to be backed with investments in the industrial capacity, workforce and regulatory improvements required to deliver them.

“Yet the budget cannot ignore Australia’s longer-term objective of boosting productivity and economic resilience. We must foster innovation in the industries of today, build the industries of tomorrow, all the while ensuring a smooth and secure energy transition.

“These challenges have time horizons extending well beyond the forward estimates. But they are also the foundations around which our national prosperity will be built.

“An effective and successful 2024-25 Federal budget will help Australia manage the tension between short-term economic challenges and longer-term directions. It should focus on:

  • Decarbonising industry, the built environment and transport by providing policy certainty, promoting investment and innovation, removing regulatory barriers and supporting skills for energy and industrial transition opportunities.
  • Developing our industrial capabilities through innovation, workforce development, trade promotion efforts and a continued commitment to skilled migration.
  • Deepening the digitalisation of economic activity to boost productivity through the adoption of automation, artificial intelligence, data stewardship and cybersecurity in trusted and secure ways.

“The Government’s Future Made in Australia ambition foreshadows a raft of budget measures to build new industries. Industry policy, however, can be fraught. It works best where there are clear, measurable and time-limited objectives, well-designed policy instruments, and acts to support rather than supplant open and competitive markets.

“Industry policy should be about governments enabling not delivering and this will be one of the tests of the effectiveness of this year’s Budget strategy.

“The budget should also bring all forms of economic policy to the table. Industry policy initiatives must be augmented with sensible reforms to and investments in our tax, skills, migration, environmental, industrial relations and other regulatory frameworks.

“Nor can these ambitions be achieved without a tremendous uplift in the education and training system. The budget should provide strong support to the roadmap outlined in the Universities Accord final report, as well as apprentice employer incentives to build the skills base in critical areas of the economy,” Mr Willox said.

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