"The challenge to deliver for the community amid the worst recession since the 1930s cannot be underestimated. Without the fiscal support to date, Australia's level of employment and the incidence of business failure would be substantially greater than we have experienced.
"Looking ahead, further fiscal measures are required before this job of warding off a more severe downturn is done. The human, economic and fiscal costs we have experienced during the COVID crisis would have been much higher without the stimulus already delivered or announced: a case of spending money to avoid losing more money.
"While additional fiscal measures will add further to the deficit and to the stock of debt, as the Reserve Bank has said, Australia's level of government debt is manageable and is considerably lower than in most other developed countries. Further, with interest rates set to remain low for a number of years, the cost of servicing that extra debt is also low.
"This should give the Government confidence to make the big investments needed to rebuild our economy.
"That is not to say that we should permanently put aside the objective of rebuilding our fiscal strength. Indeed, it must remain a priority and we will need to take decisive steps to restore our fiscal strength over coming years, including in relation to changes to our pattern of taxation.
"The Budget also presents an opportunity to act on measures that will rectify the underlying weaknesses in the economy that were evident prior to the onset of the COVID-19 crisis," Mr Willox said.
Ai Group's recommendations for the October Federal Budget include:
- A range of measures to boost employment, skills and employability including:
- National program of wage support and incentives for cadets and interns in companies.
- Broad wage support for the commencement of new apprentices and trainees.
- Program of new pre-employment initiatives for youth.
- Program of skills assessment and adaptive training for displaced workers.
- Incentives for companies to invest in training for existing workers.
- Funded multi-partner industry-training hubs.
- Improved funding for vocational education and training.
- Extend the term of the Coronavirus Supplement and make a further Economic Support Payment similar to earlier stimulus packages.
- From 1 January 2021 increase take-home pay and household spending by bringing forward some of the already-scheduled reductions in personal income tax. Ai Group recommends:
- Lifting the upper threshold of the 19% tax rate from $37,000 to $45,000.
- Reducing the tax rate on incomes between $45,000 and $90,000 from 32.5% to 30%.
- Bringing forward the changes to the Low-Income Tax Offset (LITO) and the Low and Middle Income Tax Offset (LMITO) by six months.
- Boosting business cash flows, investment and employment by extending the reduction to 25% in the company tax rate that is already scheduled to take effect from next July for business with turnover below $50 million, to companies with turnover of less than $1 billion.
- The Federal Government should work with the states and territories to further accelerate infrastructure and housing projects already in the pipeline and to add further projects to the pipeline with accelerated approvals.
- The withdrawal of the legislative proposal to cut the coverage of the Research & Development Tax Incentive and to remove the spectre of the anomalous application of an intensity-based program.
- Advancing environmental objectives by allocating $500 million over two years for capital grants to rapidly scale up the penetration of existing energy efficiency and energy management technologies.
The full Ai Group Budget Submission is available here.
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