For Australia’s building and construction industry, the worse-than-expected budget deficit outlined by the Treasurer in the Mid-Year Economic and Financial Outlook (MYEFO) earlier this week highlights the urgency for the Government to embark on a program of major reforms to lift productivity and grow the economy.
Master Builders will be looking to the quality of the Government’s response and welcomes the Treasurer’s commitment not to increase taxes, which would have acted as a ‘damp squib’ on the economy.
To accentuate the positive, getting the structural budget deficit under control presents the Government with the opportunity to radically alter the national public policy narrative and put the economy on the right path - not just for the next three years but for the next three decades.
In the medium to longer term, microeconomic reform must be one of the critical approaches to tackling the budget’s structural weaknesses and these must have bi-partisan support.
In the short term, the top priority must be urgent action to re-energise non-mining sectors of the economy to encourage business to invest and create jobs. Master Builders is looking for immediate measures to reinvigorate the building and construction industry to drive increases in productivity and economic growth.
Equally urgent is the need to cut Government expenditure in unproductive areas. The recommendations of the forthcoming Commission of Audit will be need to be carefully examined to effectively target appropriate spending cuts.
Master Builders hopes a knee-jerk reaction in slashing vocational education and training does not occur. Training young people today is an investment in tomorrow and undermining the nation’s skilled workforce would lack vision.
However, as the Governor of the Reserve Bank recently told the Parliament’s Standing Committee on Economics, monetary policy has been playing its part to support demand but “In the end, though, firms and individuals have to have the confidence to take advantage of that situation. They have to be willing to take a risk – on a new project, a new product, a new market, a new worker. Monetary policy can't force spending to occur.”
It is by restoring confidence that the Government can nurture investment in non-mining sectors such as infrastructure, commercial and residential building and help raise revenue while getting the longer term economic settings right.
Reforms such as the restoration of the Australian Building and Construction Commission (ABCC) and the Productivity Commission Inquiry into the cost of construction can help build confidence of business, investors and consumers in the high employment building and construction industry - which through its supply chain impacts many other industries and has economy-wide flow-on effects.
Finally, the Government should not be afraid to positively respond to the findings of its various inquiries, particularly in the area of taxation or moving the industrial relations pendulum to more productive settings.