"While the budgeted surplus for 2012-13 is welcome and will have important national benefits, there are considerable risks in the way it has been achieved.
In particular, the additional taxes and costs imposed on industry will undermine the ability of business to make the critical longer-term investments needed to boost productivity, improve our global competitiveness and lift employment," Australian Industry Group (Ai Group) Chief Executive, Mr Innes Willox said.
"The Government has made a strategic decision to favour a short-term boost to consumption at the expense of the longer-term drivers of economic growth.
"The scrapping of the company tax cut that was to be financed from the Minerals Resource Rent Tax is a major blow to business. It will reduce incentives to invest and innovate and is a particular set-back for businesses in non-mining, trade exposed industries such as manufacturing that need to invest to lift productivity to overcome the impacts of the strong Australian dollar, weaker global demand and the impending carbon tax.
"While the previously announced loss carry-back measure will provide some benefit to businesses, this will not provide immediate relief, and it will be overwhelmed by maintaining the company tax rate at a level well above that of similar developed economies.
"The lack of commitment to reaching consensus on business tax reform is deeply disappointing. Australia clearly needs an agreed long-term path to substantially lift the competitiveness of the business tax system.
"The changes to the tax treatment of Living Away From Home allowances and benefits will exacerbate the difficulties for business in attracting highly skilled employees to fill positions away from their home. It will compound the costs imposed by the recent changes made in relation to temporary residents.
"There are nevertheless a number of positives in the Budget for industry. These include:
The increase in the level of permanent immigration for 2012-13 to 190,000 will help address skill shortages and is in line with Ai Group submissions;
The greater emphasis on incentives to encourage the workforce of mature-aged Australians is an important contribution to boosting workforce participation;
The strength of the ongoing commitment to higher education, training and skills is also welcome. Ai Group will watch the impact on business of the adjustments to Commonwealth employer incentives;
The initiatives to establish a Manufacturing Technology Centre and Australian Skills Centres of excellence are welcome.
"In the lead-up to the Budget, Ai Group argued against further changes to the Research and Development Tax Incentive and we are pleased that the Government has not sought to achieve further savings in this area.
"Ai Group is concerned about the impacts on industry and capability of significant cuts to defence spending. While the commitment to the Future Submarine Program is welcome, the deferrals of several major projects including the purchase of the Joint Strike Fighter, will clearly have a negative impact on domestic industry which supplies and sustains the Australian Defence Force," Mr Willox said.