Tuesday, April 3, 2012

Company directors urge government not pursue budget surplus at any cost

A major business lobby group is urging the Federal Government not to push for a budget surplus at any cost.

The Institute of Company Directors (AICD) has warned that business is already hurting from the high Australian dollar and that the pursuit of even a wafer thin surplus could damage the economy.

Read the story on ABC News Online.

An index by the Institute shows 90 per cent of directors surveyed believe the Government's performance is continuing to damage consumer confidence.

According to the index released today, around 60 per cent of directors say it is not vital for the Government to achieve a budget surplus in 2012/13.

AICD chief executive John Colvin told AM that only 26 per cent thought that achieving a budget surplus was vital.

"The view of the directors, or the majority view of the directors, is that that's more of a political aspiration than an economic one," Mr Colvin said.

"Any more burdens to business at this stage of the cycle would be regarded I think as a difficult thing for business and probably counter-productive."

Balancing act

Mr Colvin said that while many company directors would normally urge a budget surplus, most agree the time is not right to make spending cuts that could potentially damage the economy.

"My surmise would be that [directors] would think that a budget surplus is the right thing to do, but trying to do it all at once or in a very quick manner rather than staggered over time, can be hurtful in the short term," Mr Colvin said.

"All businesses have to be careful about paying off debt, making sure the shareholders are looked after, making sure they can spend in terms of investment and what have you.

"It's a balancing act all the time for businesses, so I think they would assume that the balancing act in all those areas is a better way to go rather than sort of just hammering away on a debt level. "

Mr Colvin said that the government would be better focused on issues such as infrastructure, health, education, business regulation and industrial relations.

"Industrial relations was ranked as a number one concern by 20 per cent of those surveyed directors," he said.

"Ninety per cent of directors, which is a very high number, said that infrastructure spending was too low."

The index also says that around 90 per cent of directors still believe the performance of the Federal Government is continuing to hurt consumer confidence.

"Obviously it's negatively impacting on people's willingness to spend and get the economy moving outside the resources and a few other related industries," Mr Colvin said.

Carbon tax

Mr Colvin also identified the carbon tax as an issue affecting business, though for many it was no longer a primary concern.

"Significantly fewer directors, at 16 per cent in this survey down from 31 per cent in November, identified the carbon tax as one of the main economic challenges facing business, although more than 60 per cent of directors still believe that the announcement and the legislation of the carbon tax will impact their business negatively," he said.

"That's pretty much unchanged from the last survey which had about 63 per cent.

"So 60 per cent of directors still believe the announcement of legislation of the carbon tax will impact our business negatively."

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