Federal Treasurer Wayne Swan
Federal Treasurer Wayne Swan Kari Bourne

BCA argues that Swan's budget plan must be 'sensible'

FEDERAL Treasurer Wayne Swan must use the May budget to outline a "clear and sensible" plan for a return to surplus, the Business Council of Australia says.

The plan should include an independent review of the size and scope of government and its approach to spending, the BCA argues in its pre-budget submission.

It comes after the Australian Chamber of Commerce and Industry used its pre-budget submission to urge Mr Swan to detail a "credible" path back to surplus, as well as conducting a "root and branch review" of government spending.

Mr Swan late last year walked away from his much-vaunted return to surplus in 2013-14, citing dwindling revenues caused by a drop in commodity prices.

BCA chief executive Jennifer Westacott said the government's fiscal strategy had failed, claiming it had spent "more than it should in recent years".

"Just as GFC-related stimulus was being unwound, new spending programs started to build and amount to a $49 billion impact on the budget over the forward estimates," Ms Westacott said.

"Spending is not being fully offset with real savings because it has relied on revenue growth which hasn't eventuated, and because more than half of the $28 billion in recent savings claimed by the government have been made up by timing shifts that have no lasting budget benefit."

Ms Westacott said finding the money to fund "worthy" policies such as the National Disability Insurance Scheme and Gonski education reforms would becoming increasingly difficult without a change of approach from the government.

She also cautioned the major parties on over-promising between now and the federal election.

Any new commitments should be made without the need for increased taxes and reduced services, she said, both of which would "drag down Australian living standards over the long term".

"The size of Australia's fiscal challenge reinforces the importance in this election year of all parties putting forward economically responsible policies which support confidence, growth and jobs and which do not undermine the budget position," she said.

"The election environment provides an opportunity to remind ourselves why sticking to a credible medium-term fiscal strategy, including a clear pathway back to surplus, matters to every Australian."

The BCA submission also calls for: a refreshed set of fiscal rules, including a cap on tax as a share of GDP, and putting aside a proportion of future surpluses; improving productive capacity by lifting infrastructure investment, and dramatically improving the planning and prioritisation of infrastructure projects, and; developing a blueprint for long-term comprehensive tax reform.

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