Business Council chief executive Jennifer Westacott said it’s good news that the economy is still growing but the pace needs to pick up to repair the budget and secure the economic opportunities Australians need for the future.
“Growth in the last quarter was fuelled by our powerhouse mining and export sectors but domestic demand flatlined, meaning Australia is more vulnerable than ever to global economic headwinds,” she said.
“Annual growth of 2.7 per cent won’t deliver the sustained wages growth Australians want, the stronger revenues to government we need or the world class living standards we’ve come to expect. We need a three in front of our GDP growth number, because that is what has delivered in the past.
“Business investment equals jobs and opportunities but today’s numbers show investment sliding backwards.”
Ms Westacott said if productivity is not lifted by driving investment, innovation, and new industries, the hip pocket gains for Australians will be short-lived and they’ll continue to fall behind.
“One practical solution is to introduce a 20 per cent investment allowance for businesses to give them the confidence and certainty to start projects, invest and create the jobs we need across the economy,” Ms Westacott said.
“We will need to urgently address the serious structural barriers that risk holding back the private sector including acute worker shortages, getting rid of red tape and making it easier to do new things.”
Innes Willox, CEO of the national employer association Ai Group said the national accounts point to a clear slowing of the economy as 2022 drew to a close.
“As we enter the final month of the March quarter, the jury is still out on how far monetary and fiscal policy will need to further dampen the economy to bring inflation back under control,” he said.
“There is a clear risk that policy tightening will go too far. One sign of this risk is that were it not for the fall in imports, GDP would have shrunk in the December quarter.”
“It is critical over the period ahead that governments, businesses and employees all exercise moderation in price setting and wage claims. The risk of a price-wage spiral emerging is real. The consequences of such a spiral are more interest rate rises and the unemployment and household distress this would cause.”
ACCI CEO Andrew McKellar said with economic activity continuing to slow, the accounts release is a call to action for policies that boost competitiveness, foster productivity growth, and enhance Australia’s economic dynamism.
“Moderating economic growth signals the Reserve Bank’s efforts to rein in inflation are starting to take effect. Monthly price growth fell from 8.1 per cent in December to 7.4 per cent in January, however inflation remains far too high and must be brought back to target,” he said.
“The impact of rate rises is becoming more apparent with the growth rate of household consumption dropping considerably to 0.3 per cent, down from 2.2 per cent six months prior. Mortgage holders in particular are starting to tighten their belts and reduce spending.
“Exceptionally strong terms of trade drove the lion’s share of economic growth, however we cannot afford to rely on high commodity prices to maintain growth given the uncertain global economic outlook.
“Business investment fell in the quarter and will need to improve to lift growth. Moving ahead, businesses require policies that provide certainty and stability, fostering the right environment and confidence for investment.
“As the government prepares for the May budget, focus should turn to building a nation that is more resilient, more productive, and more competitive to ensure businesses can create highly paid, highly skilled jobs to boost living standards for Australians.
“Reining in spending to sustainable levels and a commitment to structural fiscal repair is essential to avoid locking in high inflation for an extended period.”
