Budget to Boost Productivity, Curb Price-Wage Spiral

The national employer association Ai Group has today released its submission on priorities that should be addressed in the 2023/24 Federal Budget.

“The May Federal Budget is an opportunity to refocus and sharpen the Government’s contribution to addressing entrenched low productivity and to strengthen workforce growth while also supporting efforts to avoid a price-wage spiral,” Ai Group Chief Executive Innes Willox said.

“The Budget should be designed to:

  • Contribute to the macroeconomic challenge of returning annual inflation to the target band of 2 to 3 percent over the next couple of years while keeping the economy on a growth path; and,
  • Take substantial steps towards the widely shared ambitions of achieving a sustainable step-up in the pace of real wages growth; ensuring the availability of economic and social opportunities for a wider range of Australians; and forging a credible and low-cost path towards net zero emissions.

“Ai Group’s current assessment is that Australia is very close to the point of macroeconomic adjustment where the economy will slow sufficiently to reduce inflation to target levels. In this assessment the Budget should avoid stimulating spending and prices and also avoid adding to contractionary pressures.

“We acknowledge the considerable uncertainties and in particular the importance of avoiding a price-wage spiral fed by expectations of inflation continuing at 2022 levels in 2023 and 2024.

“Regardless of the net position of the May Budget, Ai Group urges the Government to take steps towards meeting the widely shared objectives relating to sustainable wages growth, opportunity and emissions reduction. The constrained macroeconomic position implies that such steps involving spending in 2023-24 will require the reprioritization of existing commitments.

“Taking meaningful steps towards these longer-term objectives requires ongoing expansions in Australia’s economic capacity by promoting the growth of the workforce, investment and productivity. Our proposals include:

  • an increase in the permanent migration target;
  • investments in a mix of skills development initiatives;
  • a commitment to greater accessibility and flexibility of early childhood education and care; and
  • investments in business capability development including in the defence industry.

“The Budget also should firm up proposals to improve energy efficiency both for households and for non-residential energy users not covered by the Safeguard Mechanism.

“We also propose the Government ensure that changes to Australia’s workplace relations arrangements are supported by sufficient funding of the Fair Work Commission, the Fair Work Ombudsman and registered organisations to ensure appropriate governance of, and compliance with, the changed arrangements,” Mr Willox said.

Ai Group’s Budget priorities include:

  • Increase the migration planning levels for permanent migration in 2023/24 from 195,000 to 220,000. Two thirds of the target should be allocated to skilled migrants.
  • Fund a workforce development support program that assists employers with strategies and includes education and training providers to meet and develop required skills.
  • Introduce incentives for employers to encourage upskilling that meets new key skill needs.
  • Expedite an expanded and reinvigorated apprenticeship system
  • Support a broader range of higher-skill apprenticeship programs in new priority occupations.
  • Establish a new national internship and cadetship program that encourages businesses to provide employment opportunities for VET and higher education students.
  • Early Childhood Education and Care (ECEC) options should be more affordable and more flexible. ECEC options must be better targeted to the needs of working households to accommodate flexible working and shift arrangements.
  • The National Reconstruction Fund (NRF) should be managed effectively and cautiously driven by targeting areas where there is a funding gap due to some failing in the market and focusing on projects that unlock further capabilities within supply chains and/or industrial clusters.
  • Release of a modern and fully updated Force Structure Plan with added visibility and accountability for project approvals, capability delivery and acquisition timeframes.
  • The forthcoming National Energy Performance Strategy (NEPS) should include energy-saving measures across all sorts of energy users, including industry.
  • Appropriate funding to ensure effective governance of Australia’s workplace relations and measures to facilitate employer compliance with the major changes under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022.
  • A specialised division should be established within the FWO with responsibility for the building and construction industry and the FWO should receive the same level of funding as the ABCC was receiving.

The full Ai Group Federal Budget submission is available here.

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