Put profit ahead of politics, Oz urged

The chamber has warned that a sustainable surplus can not be achieved without the creation of 200,000 jobs. Photo / Thinkstock

Australia has been warned to put profits before politics if it is to survive the battering the global economy is expected to take this year.

The Australian Chamber of Commerce and Industry said that without profit growth, unemployment would surge, the Government would not achieve its promised budget surplus and businesses would not be able to meet higher electricity costs expected to flow from the new carbon tax.

"With rising costs and downward forecasts, if a business is not making a profit in 2012 it's unlikely to be around for much of 2013," the chamber said in a preview of the year.

The chamber said that after a disappointing year that had focused on wealth distribution instead of wealth creation, growth was needed in the economy's slower lane.

"Unfortunately, 2012 carries the risk of rising business failures and higher unemployment due to lower global growth forecasts and increased business costs pencilled in from mid-year," it said.

"The Reserve Bank's two interest rate reductions in the past two months warn of tougher times ahead. This needs to be a year when making profits is greeted with a sigh of relief, not as a dirty word. Making a profit and protecting the business bottom line will need to be the catch-cry in 2012."

The chamber warned that the Government would not achieve a sustainable surplus in 2012-13 if tax receipts from business did not grow, and unemployment - already forecast to be 80,000 higher than last May's predictions - would not stop rising unless about 200,000 jobs were created during the year.

Without increased sales and rising profit margins, businesses would not be able to afford higher electricity costs from the July 1 introduction of the carbon tax, nor higher wage and penalty costs.

"Profits don't grow on trees," the chamber said. "They have to be made. Business, banks, governments, the Parliament, unions and the community each have a responsibility to support new wealth and new profits."

Banks needed to provide access to capital and pass interest rates cuts on to business customers, governments needed to introduce integrated reforms - including industrial law reforms - and the federal Parliament should reject new business costs such as planned rises in the superannuation levy. Unions, it said, needed to resist making "exaggerated" bargaining demands.