CCIWA Chief Economist
Today’s Federal Budget has laid bare the fiscal and economic challenges facing Australia. The test still to come is to identify reforms that will drive growth.
The fundamental challenge outlined by the budget is paying for our future spending needs. The NDIS is on track to cost $52 billion a year. Defence spending is rising to $44 billion. On top of that, interest repayments are now forecast to surge to $33 billion a year.
This occurs against a backdrop of rising inflation, China’s economic slowdown, war in Ukraine and higher interest rates all threatening the economic outlook. Inflation is expected to peak at 7.75% before it stabilises.
The upshot is that Australia’s GDP growth will fall to just 1.5% in 2023-24. This is largely driven by a more realistic forecast for productivity growth, now expected to average 1.2%.
There are some worthy initiatives in the budget. The implementation of increased flexibility in the paid parental leave system, and $5.4bn to further subsidise childcare costs, will support more parents, particularly mothers, to participate in the workforce to the extent they choose.
However much more will need to be done to drive economic growth, which is the only sustainable solution to the pressures on the budget.
CCIWA looks forward to hosting Treasurer the Hon Jim Chalmers MP for a post-Budget Breakfast on November 3rd, the first opportunity for WA businesses to engage on the Federal Government’s vision for the economy.