Restoring business & household confidence is key to recovery

Lifting confidence in the economy is both the most important factor in supporting a recovery and the biggest challenge we face, according to Australia’s largest business network, the Australian Chamber of Commerce and Industry.
“Today’s release of the June quarter National Accounts is a stark reminder that imposing severe restrictions on households and businesses causes significant economic damage,” ACCI CEO James Pearson said.

“So far, household incomes have been shielded from the economic pain of the COVID-19 restrictions by the massive amount of Government stimulus that has offset the negative impact on wages and salaries. But this support cannot last forever.”

In the months to come, many households will face hits to incomes and wealth, and elevated levels of unemployment. And many businesses will be cautious about investing in their future while there is excess capacity and the need to re-evaluate their long-term prospects in a post-COVID-19 world.

“The shape of the recovery will ultimately depend on the ability and willingness of households and businesses to spend.

“To avoid further harm to the economy we need to move people and goods around and in and out of our country in a safe way. Governments should adopt a risk management approach to COVID-19 that uses targeted, proportionate and localised restrictions rather than blanket bans and closed borders.

ACCI presented the Government with a suite of recommendations for the 2020-21 Budget, including bringing forward the personal income tax cuts already legislated and boosting business investment by making permanent the instant asset write-off and accelerated depreciation deduction.

“The October Budget is an opportunity for the Government to put in place policies that support Australia’s recovery. For too long tax reform has been in the too hard basket. It must be at the top of the reform agenda if we are to achieve strong, inclusive job creating growth. ” Mr Pearson said.

“National Cabinet needs to start by bringing the States and Territories together to tackle the ongoing issue of payroll tax. A tax on jobs makes no sense at a time when we need to save every job we can, let alone create new ones.

“What matters most is restoring household and business confidence to save and create jobs in a world that is different to the one we knew before COVID-19 struck.”

For more information:
Ross Lambie | Chief Economist | +61 427 413 822