The centrepiece of Treasurer Jim Chalmers' third budget was the $22.7 billion Future Made in Australia fund to bring manufacturing back onshore and respond to the United States' ramping up of clean energy spending.
Measures such as tax incentives and cutting red tape are aimed at boosting investment from the private sector to key areas in Australian industry.
Changes to foreign investment rules to lure foreign capital to Australia were an important step in increasing competitiveness, said Bran Black, chief executive of the Business Council of Australia.
"But the key thing for us is that there's still so much more work that we need to do to genuinely improve Australia's competitiveness," Mr Black told Sky News on Wednesday.
"Tackling the hard yards associated with tax reform, genuine industrial relations reform that adds to flexibility in workplaces, and of course, reducing the burden of regulation."
Bran Black says foreign investment rule changes is an important step to increasing competitiveness. (Mick Tsikas/AAP PHOTOS)
On the budget more broadly, Mr Black said not enough restraint had been put in place on spending, with deficits forecast from 2024/25.
While measures providing cost-of-living relief such as energy rebates and tax cuts were positive, there was concern broad strokes could lead to higher inflation in the long run.
Without productivity growth to back it up, wages growth could be seen as inflationary as it was "driving employers to have to put their costs up in order to be able to fund increased wages costs," he said.
The Australian Industry Group said the budget revealed a "modest ambition" to develop industrial capabilities but also predicted no material improvement in business conditions, growing unemployment and a deteriorating fiscal position.
"The test of any budget is whether it will make Australia more productive, prosperous and resilient," said chief executive Innes Willox.
"That the treasurer did not mention boosting our declining productivity performance in his speech is disappointing."
Other business groups questioned whether enough was being done to tackle long-term financial pressures.
Cassandra Winzar, chief economist at the Committee for Economic Development, said spending measures risked stoking inflation.
"The Albanese government's second surplus, while welcome, has again been driven by higher income tax takes and strong commodity prices," she said."These are all temporary windfalls and are unlikely to persist as the economy slows."
ACTU president Michele O'Neil praised the budget's commitment to supporting pay rises in aged care. (Lukas Coch/AAP PHOTOS)
Australian Council of Trade Unions president Michele O'Neil praised the budget for boosting wages.
"The commitment to supporting pay rises in aged care and early childhood education will support the workers in these critical industries, who are primarily women," she said.
"This announcement puts Australia back on the path to a stronger, more resilient, and more diverse economic base, and turbocharging the investment necessary to build the jobs of the future in a clean economy."
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