The Business Council of Australia has sounded the alarm over the federal budget, warning the Turnbull government its plan to return to surplus by 2020-21 is "fragile" and calling on the Parliament to back further spending cuts.
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In its budget submission, the BCA says real spending will rise too quickly at 3 per cent annually from 2020 because of new spending programs and an ageing population outpacing economic growth. Left unchecked, by 2055 spending could hit 30 per cent of GDP, up from 25 per cent now, locking in structural deficits of at least 3 per cent of GDP. That is an equivalent to an extra $50 billion debt per year.
To head off that potentially massive increase in debt, the business lobby group says the Turnbull government must limit spending growth to 2 per cent per year, secure support for its $13.2 billion savings package and if the current savings can't pass the Senate, find savings elsewhere.
Also included in the BCA's 18-point budget wish list are more power and autonomy for the independent Parliamentary Budget Office, a call to examine the performance of more than 1200 federal agencies, greater infrastructure spending, greater efficiencies in health and education, industrial relations changes recommended by the Productivity Commission and stronger incentives to get people off the dole and into work.
And despite the estimated $50 billion, 10 year hit to federal coffers, the group argues the government's plan to cut company taxes to 25 per cent should be implemented.
BCA chief executive Jennifer Westacott told Fairfax Media the group believed the Turnbull government's "surplus target is fragile. We are living in a fool's paradise if we think the current economic settings can remain."
"We have to get out of this gridlock mindset, get the budget in order and grow the economy faster. To do that we have to pass the company tax cuts - including for the biggest companies - as that will drive investment in innovation and productivity growth."
Debate over the company tax cuts, and a package that links $13.2 billion in savings measures with an extra $1.6 billion on childcare, will likely come to ahead when Parliament sits next week.
Most of the savings are unlikely to pass the Parliament, though negotiations continue with the crossbench, while the company tax is at this stage likely to be delivered only to companies turning over less than $10 million a year.
Treasurer Scott Morrison has insisted the return to a razor-thin surplus in 2020-21 is a projection, rather than a promise.
The report notes the $22 billion in savings passed late last year represented just 1 per cent of total forecast spending of $2 trillion over the same period and "falls well short of the task of returning the budget to enduring surplus".
Ms Westacott said, however, that the government had "tried really hard" to pass savings and that "if the crossbench isn't going to work with the government and pass these savings, they have to accept the consequences" for the budget.
