Australians could face tax increases of more than $5000 per household per year, or savage cuts to vital services like health and education, if the Australian Parliament fails to break its gridlock over Budget savings measures, the Business Council of Australia has warned.

“The task of getting Australia’s budget back in order is now urgent. Parliament must ensure the Australian people receive much better value for the $440 billion spent each year,” chief executive Jennifer Westacott said, releasing the Business Council’s submission to the 2017-18 budget.

“Stubborn opposition to savings measures and the absence of an agreed strategy to tackle the budget problem are foisting a growing debt burden on young Australians and our future generations.

“Australian households will bear the costs of inaction through blunt cuts in services, higher taxes and a weaker, less resilient economy.

“From 2020 onwards, annual real spending growth is expected to ramp up to 3 per cent, outpacing projected economic growth and locking in a structural deficit of at least 3 per cent of GDP or $50 billion in today’s terms.

“Taxes would need to rise by more than $5000 per household per year on average, or $2000 per person, just to plug that gap, and even higher taxes would be needed to start paying off debt.

“The alternative would be to slash government services by $50 billion. That’s the equivalent of one-third of today’s social security budget or almost the entire education and defence budgets combined.

“Neither of these options – higher taxation or savage budget cuts – is acceptable but they are inevitable if we fail to act now.

“The deficit wasn’t created by lower revenues, and new taxes are not the solution. Nor are higher tax rates, as they would do nothing to improve services or increase value for money. We cannot afford to think that as our spending grows, we should simply tax more.

“In our Budget submission, we set out a responsible five-pronged strategy to promote stronger growth, better services and increased value from government spending, with the ultimate goal of achieving higher community living standards:

• an architecture for embedding a systematic approach to improving program outcomes and delivering sustainable budgets, guided and supported by overarching fiscal goals and rules to contain spending and revenue growth and the overall size of government
• measures to prevent budget slippage in the immediate term including the passage of several blocked savings measures and continued functional and efficiency reviews
• actions over the medium term across several program areas, including healthcare and education, that would contain growth in outlays at the same time as improving program effectiveness and service quality through better targeting and productivity improvements
• management of emerging spending risks
• a suite of policies to promote stronger growth including infrastructure, comprehensive tax and regulatory reforms that should be implemented in tandem with budget repair.

“The window to contain spending growth is rapidly closing. The Business Council believes that Australia has until 2025 to put the budget on a sustainable footing before we reach tipping point.

“Lacklustre economic growth and still-languishing business investment, coupled with heightened global uncertainty, make taking action more, not less, urgent.

“This Government has made several attempts to get the Budget under control but has been blocked at almost every turn.

“It is time to end the gridlock, particularly as we know a failure to do so will hit the most vulnerable Australians the hardest.”

Business Council 2017-18 Budget Submission