A massive hike in infrastructure spending, investment in education and measures to improve housing affordability demonstrate that the Government is willing to go ‘all in’ to boost economic growth, according to PwC CEO Luke Sayers.
“The last two budgets have been frugal and fiscally restrained, but tonight we’ve seen a Government that is willing to push in all its chips to drive growth. Yes, there is additional borrowing and debt, but the spending has largely been directed to those areas that will have the biggest impact on productivity and job creation,” Mr Sayers said.
“For too long politics has trumped progress and self-interest has trumped the national-interest. We are hopeful this Budget will act as the catalyst that converts the improved sentiment in business confidence we’ve seen recently into concrete private sector investment.”
“Bringing forward spending on close to $50 billion worth of infrastructure, including Sydney’s second airport, Brisbane to Melbourne inland rail, WA’s Metronet and a widening of the ‘city deals’ program is a bold, positive move that will turbocharge productivity.
“Returning to surplus in a low growth environment is difficult, which is why infrastructure has been prioritised due to the multiplier effect it has on economic growth. However, as a nation we are eventually going to need to have a conversation about our underlying debt burden, and the trade-offs that we will need to make to address it.
“The Government's education package, with its focus on underlying student needs and results, will create an environment where we can improve our national education performance. With the funding locked in, the focus must rapidly shift to student outcomes and quality, and everything that underpins it.
“Australia already invests four times as much per student as Poland for a similar result, so the Gonski 2.0 review, will be fundamental in ensuring the additional investment translates into improved student outcomes."
“Directionally, we’re supportive of any measures to support Australians realising their dream of home ownership. In that regard it’s good to see the Government begin to address the issue by helping people save for their first home as well as a number of measures to address supply, but this is a complex problem that also needs to address choice, access and stability measures for the many Australians who rent rather than own.
Major Bank Levy
On the new Major Banks Levy, Mr Sayers said it would need to be implemented carefully, suggesting the overseas experience with similar proposals, such as in the UK, had yielded mixed results.
“The ongoing stability of the global economy is anything but guaranteed, so we need to strike the right balance between our fiscal situation, community expectations, and ensuring we have a banking sector that provides a bedrock of confidence, strength and stability,” Mr Sayers said.
“Bank levies have been tried in other jurisdictions and have created complexity, either acting as a handbrake on investment and jobs or encouraging those with the ability to do so to focus their operations elsewhere.”
“More broadly, taxing any one segment or sector of the economy risks creating distortions and unintended consequences. Directionally, we should be moving our tax regime towards being simpler, more efficient, and less reliant on taxes that remove incentives to invest, transact, and hire people.”
According to preliminary PwC modelling, if the the bank levy is passed on to individuals and businesses as higher borrowing and transaction costs, and to consumers as higher prices, it could reduce GDP by circa $2.5 billion over the next four years, with approximately 6200 fewer jobs.
“With fantastic progress being made on trade deals in our region, Australia’s agricultural sector has the potential to restore its standing as the third major pillar of our economy, alongside services and mining.
“We have world-class agricultural products; making it easier for the world to access them must be a national priority. To that end, bringing forward the investment in inland rail and the establishment of a regional growth fund will further support a sector that is critical to our future prosperity.”
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