BCA says services set to suffer
The BCA says serious budget repair is needed to avoid big cuts to social services and living standards.
The Business Council of Australia’s pre-budget submission says that without a solid strategy to end budget gridlock, the growing debt burden will simply be rolled over onto future generations.
“Households will face blunt cuts in services, higher taxes and a weaker, less resilient economy,” the business lobby predicts.
It adds to a growing chorus calling for an end to the impasse, which has seen very little in the way of substantive saving achieved since 2013.
The BCA says taxes would need to rise by about $5,000 per household per year or $2,000 per person to pay off the growing debt.
The BCA said social services would have to be slashed by the equivalent of a third of today's social security budget – equal to eliminating the entire education and defence budgets, combined.
“None of these options is acceptable, but without intervention they are inevitable,” the submission said.
BCA chief executive Jennifer Westacott said it was a big challenge, and becoming more urgent.
“Stubborn opposition to savings measures and the absence of an agreed strategy to tackle the budget problem are foisting a growing debt burden on young Australians and our future generations,” Ms Westacott said.
“Australian households will bear the costs of inaction through blunt cuts in services, higher taxes and a weaker, less resilient economy.
“Burgeoning debt would leave no buffer to respond to economic shocks, or any capacity for substantial investments in physical and social infrastructure.”
“They are very real. There's only one way of turning it around - we increase taxes, we cut services or we move a whole lot of people into a higher tax bracket. That's just unacceptable.
“They're extremely alarming projections and that's why we're saying we just have to end the gridlock here. The implications of just kicking this can down the road are really serious.
“We're not saying any of these things should be on the table — we're saying that we either start the careful redesign of programs like health where we get better outcomes, where we slow the rate of growth or we're faced with big cuts later down the track.”
Australia’s annual real spending as a result of new programs and an ageing population will rise to 30 per cent of GDP by 2055, the BCA said.
It warned that structural deficits of at least 3 per cent of GDP would be “locked in”, adding $50 billion in debt each year, unless dramatic moves were made.
The BCA blamed Labor for opposing savings measures without providing alternative measures.
“We are in a vicious circle. The only way to break free from this negative sum game is for the Parliament to act in the interests of the community,” the submission said.
The business lobby wants the company tax rate to be cut to 25 per cent from 30 per cent over 10 years.
“Reducing the company tax rate has become urgent as more and more countries reduce their rates and new business investment in Australia is weak,” the submission said.