Ai Group proposes package of fiscal measures to address economic crisis

The Australian Industry Group (Ai Group) has released a package of fiscal measures designed to help the Australian economy weather the global crisis and to emerge from it stronger and more resilient.

The Australian Industry Group (Ai Group) has released a package of fiscal measures designed to help the Australian economy weather the global crisis and to emerge from it stronger and more resilient.

“The organising principle of the submission is that we should aim to align as best we can the necessary shorter term economic stimulus with the longer term imperative to support productivity and growth,” Ai Group Chief Executive Heather Ridout said.

“2009 is going to be a difficult and unpredictable year. The deterioration of global conditions and the sharp slowdown in the domestic economy call for an additional fiscal stimulus of at least the magnitude provided by the Government’s Economic Security Package announced in October 2008.

“In the face of the exceptional level of uncertainty, the Government needs to retain a high degree of agility over the timing and extent of policy initiatives.

“An announcement of additional fiscal expansion need not wait until the May Budget should conditions warrant earlier action. Moreover, further stimulatory measures may be required over the course of 2009-10.

“The Ai Group package Managing Through Troubled and Unpredictable Times and Emerging Stronger has been provided to the Federal Government and is an integrated set of measures designed to boost consumer and business spending; to support the jobs market; to develop workforce skills and business capabilities; and to upgrade Australia’s existing public infrastructure.

“It would work alongside further interest rate reductions and appropriate measures to facilitate a return to healthy functioning credit markets and to bring forward and strengthen recovery from the current downturn.

“The concerted efforts to boost the economy must not be put at risk by other policy measures, for example in workplace relations and climate change, which may put employment and business investment under pressure. Policy initiatives in these areas need to be designed to work in the bad times as well as the good.

“It is vital that the emphasis on navigating through the downturn does not detract from efforts to build longer-term capacity. Ai Group also proposes a range of investments in the fundamental drivers of growth: innovation; new infrastructure; education and training; greenhouse gas abatement and export market development.

“Ai Group estimates that the measures proposed would see around 100,000 fewer people unemployed at the end of 2009 by containing unemployment growth to around one-per cent below what it would have been without the proposed measures.

“While a budget deficit is expected and indeed desirable in the current circumstances, the need to stimulate the economy should not serve as a reason to introduce or maintain inefficient programs. Indeed, Ai Group proposes that the Budget should continue the process of rigorous assessment of programs and re-prioritisation of outlays in order to generate greater public sector efficiency.

Ai Group’s Budget proposals include:

Households – Stimulate consumer spending by bringing forward to July 2009 key components of the personal income tax cuts currently scheduled to take effect in 2010. These will add to the tax cuts already scheduled for July this year. This would involve raising the Low Income Tax Offset to $1,500; lifting the threshold at which the 30 per cent rate takes effect to $37,000 and reducing the marginal tax rate applying to incomes between $80,000 to $180,000 to 38 per cent. The scheduled and extra tax cuts we propose would deliver a combined $14.42 a week in the hand for an income earner on around average weekly earnings.

Business – Introduce a tax refund for small and medium-sized businesses making losses in 2008-09 or 2009-10. Allowing businesses a tax refund in relation to losses would provide relief from adverse cash constraints. It is a measure that would give businesses critical leeway – including for the purpose of retaining employees that might otherwise be retrenched. Provide an additional tax deduction for capital investment and business expenditure on training, research and development and export market development in 2009-10. This would encourage business spending in these critical areas at a time when such areas of “discretionary” spending are under threat.

Infrastructure Renewal – Introduce a new $2 Billion drive to renew public infrastructure to accelerate infrastructure repairs and upgrades by Commonwealth, State and Territory and local government departments and agencies.

o The aim is to simultaneously boost activity and address the under-allocation of resources for maintenance across a wide range of areas including main and local government roads, bridges, parks, hospitals, schools and libraries, public housing, train stations and rail rolling stock.

o The $2 Billion would be allocated over the next two years with firm deadlines imposed on agencies to ensure that projects get underway as soon as possible in order to maximise the fiscal stimulus.

Training in the Downturn – Selective boosts to training, education and the development of business capabilities including measures to retain the strength of the apprenticeship system; to increase the emphasis on young people at risk of not completing base levels of education and training; and to increase the resources and the reach of the Enterprise Connect program for the 2009-10 and 2010-11 years.

Sufficient funds should be available to support training options for those made unemployed and to upskill the existing workforce.

Investing in Growth Drivers – Investment in a range of initiatives to build longer-term productivity and workforce participation by investing in innovation; energy and broadband infrastructure; education and training; greenhouse gas abatement and export market development. These proposals will help Australia to emerge stronger from the crisis and include:

Innovation – Ai Group proposes a comprehensive Innovation Package addressing five strategic areas: o Core Investment: Australian investment in the drivers of innovation has stood still over the last decade and continued investment is required to maintain Australian competitiveness.

o Knowledge Transfer: Stronger links between industry and research organisations are required to maximise the commercial potential of new ideas.

o Gap Finance: In addition to core investment in the drivers of innovation, targeted funding is required to bring innovative new products and processes to market.

o Private Sector: The focus of innovation policy and funding is (currently) skewed towards the public sector. Greater emphasis must be placed upon supporting and developing private sector R&D and venture capital activity.

o Benchmarking Performance: Despite near-universal agreement that innovation is key to future economic success very little has been done to measure the effectiveness of established innovation programs, or benchmark Australian performance against overseas markets.

Infrastructure – Ai Group has identified two important gaps in existing infrastructure plans. These gaps are in the areas of energy and the existing National Broadband Network (NBN) proposal.

o Energy — Interstate interconnection should be improved by plugging critical energy network infrastructure gaps on the eastern seaboard; an Energy Infrastructure Renewal Fund should be created to accelerate the replacement of generation facilities and the transition to lower carbon generation.

o Broadband — Ai Group proposes measures to enhance the Government’s established policy framework to create a National Broadband Network. These include a Remote & Indigenous Broadband Program to bring high-speed internet access to remote rural and indigenous areas; tax incentives to drive high-speed broadband deployment and uptake; a Community Broadband Program to enable all Australia’s health, education and community institutions to upgrade to high-speed broadband; and a Broadband Skills Program to increase skills and promote awareness of the commercial opportunities presented by high-speed broadband.

Education and Training – In education and training Ai Group supports additional measures across a range of areas to underwrite sustained improvements in our education and training performance. In particular we propose:

o Strong support for the apprenticeships system, particularly Group Training Companies, to ensure adequate levels of trade skill development over the next decade.

o Continued development of a demand-led training system with industry at its centre.

o Continued rebalancing of the training system to meet both the needs of new entrants and existing workers.

o Careful consideration of a single tertiary sector that does not compromise or undermine the necessarily different purposes and functions of Vocational Education and Training and Higher Education.

o Continued reform of the schooling system including the development and implementation of a national curriculum and the broadening and deepening of genuine vocational options.

o Extension and strengthening of industry’s role in career and transition arrangements, including Careers Advice Australia.

The full package of proposals Managing Through Troubled and Unpredictable Times and Emerging Stronger, can be accessed on the Ai Group website www.aigroup.com.au.