BCA. Afr. 110928. Pic by Michel O'Sullivan. Pic shows (left) Jennifer Westacott and (right) Graham Bradley from the BCA.

Jennifer Westacott: ”We don’t want another knee-jerk promise to get back to surplus.” Photo: Michel O’Sullivan

Big business is demanding the Labor Party copy Tony Abbott’s plan for a comprehensive post-election spending audit, accusing the government of ”budgeting by wishful thinking” and of losing control of spending in recent years.

If Labor acceded to the demand both main parties wold go to the September 14 poll without fully revealing where spending cuts could hit in the next three years.

But, said Business Council of Australia chief executive Jennifer Westacott, voters should be even more worried about ”poorly thought-through savings and knee-jerk reactions” than future unspecified spending cuts.

The Coalition has attacked Labor for abandoning its promise of a surplus in this year’s budget. But, in its annual budget submission, the council is urging the government not to try for a surplus next year either.

Instead it wants Labor to deliver a clear and convincing plan to return to surplus within three years and to then deliver consistent surpluses of 1-2 per cent of GDP.

The council is also calling for a ”new set of fiscal rules” including a ”hard cap” on growth in spending of 23.7 per cent of GDP or below and setting aside money for stimulus that might be needed in future global economic turmoil and to pay for the ageing population.

Figures released by the Australian Bureau of Statistics yesterday showed consumption spending by all levels of government fell another 0.2 per cent in the December

quarter. This followed a 1 per cent decline in the September quarter.

Ms Westacott said a surplus next year was unlikely because ”it is difficult to see what structural savings you could make in that time frame – those kinds of savings can’t take full effect quickly.”

She said the council would like the government to set out ”what percentage of revenue they believe they can pare back each year” and, while it would welcome specific long-term savings ”we certainly don’t want another knee-jerk promise to get back to surplus next year … the task is to reset the fiscal strategy rather than produce a list of savings”.

Rather than being concerned that details of spending cuts might not be known on election day, Ms Westacott said voters should be worried ”that there is no firepower in the budget to pay for things” such as Labor’s Gonski education reforms or the disability reforms or crucial economic infrastructure or the looming costs of an ageing population. She accused the government of ”budgeting by wishful thinking, estimating revenue and tax receipts and then spending the money before it is actually there”. The council’s submission cites a Deloitte Access Economics review that found the government committed to $49 billion in new spending over the forward estimates.

But that is a gross figure, counting, for example, all tax cuts and compensation associated with the carbon tax but not calculating the revenue it raises.

The council also criticised Labor for poor-quality, illusory savings, calculating more than half the $28 billion in savings claimed in last year’s midyear economic statement were just ”timing shifts” of revenue brought forward or spending deferred. Lasting savings could be found by rethinking the roles of state and federal governments, and by reining in family payments growth, a task the Gillard government had begun and for which it should be given credit, she said.