“Across industry, strong and consistent direction on policy and reform is needed to lift business confidence,” said Wayne Spanner, Norton Rose Fulbright's managing partner in Australia.
The past year has proven challenging from a Budget perspective. After more than two decades of strong growth, the Australian economy has begun to slow. Commodity prices crashed with oil, iron ore and coal dropping in value as a result of sluggish Chinese growth.
Tens of billions in government revenue evaporated as a result, blowing out deficit predictions. The government is now predicting that it may be 40 years before the Budget returns to surplus.
In a bid to stimulate business activity and household spending, interest rates were lowered to a record 2.25 per cent in February. However, manipulating interest rates can only do so much and Reserve Bank governor Glenn Stevens recently warned against putting too much emphasis on monetary policy.
There is a sense that increasing spending and putting more weight on fiscal policy might be the best way to stimulate the economy.
However, the government is under political pressure to deliver a moderate Budget and must work with a hostile Senate, which blocked about $25 billion in cost-cutting measures contained in last year's Budget.
The government also faced considerable public backlash over tough cuts to welfare, health and education in the 2014 budget. It is unlikely that the public's attitude has shifted in the context of rising unemployment, which reached a 12-year high of 6.4 only months ago and is now sitting at 6.1 per cent.
Managing partner at CBP Lawyers Dunstan de Souza (pictured) said lawyers may not be “economic gurus”, but can feel the pulse of the economy through their clients.
“We certainly know where their pressure points are, where their pain is and I can tell you what our clients are looking for is a level of confidence from our politicians,” Mr de Souza said
“[The] questions our clients are asking are, ‘Are you going to use monetary policy? Are you going to use fiscal policy?’.
“They just want a degree of certainty about the framework in which they are going to be doing business.”
Mr de Souza said it was difficult to know what to expect from the coming Budget: “I suspect the government itself doesn’t know what it’s doing ... so you would be a very brave person to be making too many predictions.”
He agreed there probably would not be huge improvements in terms of the deficit, arguing that any reduction in spending would have a damaging effect on the economy.
“It is really important that the government maintains economic activity ... I think that is an indicator that the government will this time be a bit more patient about its endeavours to fix the deficit issue,” Mr de Souza said.
He expects the government will propose a more conventional Budget this time. “It would have to, because there is no point in trying to have the ideological battle with this senate … [which] has already demonstrated it is not going to bend.”
Mr de Souza predicts the government will reconsider its reliance on monetary policy: “In the present economy, for goodness sake, how much lower can you go with interest rates? If interest rates are not doing the trick, you really have to look elsewhere.”
He would like to see the government maintain public-sector spending and direct money to the “correct space”, namely construction and development.
Mr Spanner called for action to address over-regulation and stimulate investment in industries that will define Australia’s future, such as financial services, technology, infrastructure and commodities.
“We expect these areas to be significant drivers in coming years.”