Focus on supporting business, cutting red tape to repair budget: CPA
The accounting body believes the government can relieve deficits predicted in the MYEFO with targeted business reforms.
The government should focus on cutting red tape and supporting businesses to boost the country’s sluggish productivity levels and repair the federal budget’s growing deficit, according to CPA Australia.
Last week, the government’s mid-year update showed a $21.8 billion blowout in the bottom line over the next four years.
According to the mid-year economic and fiscal outlook (MYEFO), the budget was headed for a deficit of $26.9 billion this financial year – $1.3 billion better than May’s estimate – but over 2025–26, it would grow from $42.8 billion to $46.9 billion.
The deficit was projected at $38.4 billion in 2026–27 and $31.7 billion in 2027–28.
The figures were attributed to an $8.5 billion downgrade in company tax receipts and a $100 billion downgrade in mining exports over four years, caused by a slowdown in China’s economy and lower commodity values.
“The global economy is uncertain, the global outlook is unsettling and that’s weighing heavily on our economy,” Treasurer Jim Chalmers said.
Spending on veterans’ payments, natural disasters, Medicare and early childhood education also added further strain to the bottom line, he said.
But CPA Australia said the government should be looking closer to home for solutions to the economic challenges identified in the MYEFO.
“The government cites a reduction in company tax and unavoidable spending as the main reasons behind expected increase in deficits over the next four years, but with the right policies and incentives it has the power to boost business productivity and confidence to help make up the decline in revenue from companies,” Elinor Kasapidis, chief of policy, standards and external affairs, said.
Kasapidis said the government should recognise that the “expected fall in company tax revenue is not helped by Australia’s ongoing productivity crisis”.
“This is where the government must connect the dots and use the levers it has to influence an upturn in fortunes of the economy,” she said.
“This means cutting existing red tape, improving the design of new regulation, encouraging business growth with targeted incentives, and supporting businesses to incorporate new technologies to drive efficiency.”
Kasapidis said more young people needed to be involved in business after CPA Australia’s surveys of small businesses in the Asia Pacific “routinely” found local SMEs trailed other markets in the adoption of new technology.
“The government should also be incentivising more young Aussies to follow their entrepreneurial instincts and create or buy businesses.”
Cutting red tape and supporting businesses would also help improve business confidence and conditions.
In December, NAB research showed business conditions slumped to their lowest level since COVID-19 lockdowns last month while a sharp fall in confidence erased gains from previous months.
“While business confidence is low, businesses still want to invest and grow where they can. They need a government that supports them and encourages growth and entrepreneurialism, rather than creating roadblocks,” Kasapidis said.
“This means properly engaging with the business community and focusing on easing the regulatory and cost pressures that are holding investments back.”
“A concerted effort from government to implement growth incentives for businesses would not only be well-received but could have a tangible impact on productivity and business performance.”
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