By Adam Coleman

The Business Council of Australia (BCA) is calling for a coordinated fiscal response from Australia’s Federal and state government’s to stimulate growth and prevent the worst aspects of the global economic downturn arriving on our shores.

“The global economic crisis is a defining moment for Australia’s federation,” BCA president Greig Gailey said at the launch of the BCA Budget Submission 2009–10: Budgeting for Revival.

“At the first COAG meeting of 2009, we implore them to make it a priority to decide how their taxing and spending policies can work together to minimise the effect of the downturn,” he said.

He says government spending can limit the damage from the global economic downturn by boosting confidence and compensating for declining private sector spending and investment.

“The Federal Budget needs to combine short-term stimulus measures with disciplined longer-term spending and taxing plans that continue to underpin future growth. But we must ensure all levels of government are pulling together for the national Budget to be effective.”

The BCA submission suggests it is warranted for the federal budget to lapse into deficit “in a way that maximises Australia’s future productive capacity”.

Disciplined short-term investment in areas such as infrastructure and education is the most effective strategy to foster economic resilience, it says.

The submission also calls on the government to commit to a regular five-yearly review of spending, and to develop a plan to return the Budget to surplus during the recovery.

Mr Gailey said more stimulus is appropriate, but it needs to be timely, targeted and temporary.

“Infrastructure spending can be significant in boosting the economy, but the reality is much of the national infrastructure that can be built now is in the hands of the states.”

He warned that state governments must not restrict useful spending simply to avoid running larger temporary deficits.

“We should urgently pursue strong fiscal coordination between our two top tiers of government.

 “While we are worrying about this year’s problems, we should not forget about the Australia we want to have a decade from now. Government must at all times continue to invest in measures that boost the long-term productive capacity of the economy.

“A disciplined budget strategy that addresses the short and long-term needs of the economy will ensure we are better placed to weather the economic crisis and are positioned strongly for the inevitable return of growth,” he said.

For a copy of BCA Budget Submission 2009–10: Budgeting for Revival click here.