Grattan on Friday: Is that the Coalition debt truck parked just past the election?


Michelle Grattan, University of CanberraIt was a small thing but a revealing moment during Scott Morrison’s Wednesday interview on Nine’s Today show.

Presenter Karl Stefanovic noticed Morrison seemed out of sorts, despite the government having delivered the night before a benign budget that was well received and likely to be popular.

“It is a very big budget. Josh Frydenberg had a very big smile on his face this morning. I thought you might be happier this morning, PM. Everything OK?” Stefanovic asked.

Morrison said he was “fine”. He went on: “I’ve got to tell you, Karl, the reason is this.

“I know, look, budgets are big events and that’s all fine, but I just know the fight we’re in – and the fight we’re in, and me as prime minister I’m in, is to be protecting Australians at this incredibly difficult time.

“I am very cognisant of how big those challenges are. It is with me every second of every day.”

There are a few points to be made here.




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Frydenberg spends the budget bounty to drive unemployment down to new lows


First, the government is using the budget to talk up the current threat of the pandemic to an extent it hadn’t been recently.

Morrison, in particular, had previously been anxious to emphasise the return to as much normality as possible. Now it’s more about lurking dangers.

These provide a justification for the government’s mega spending in the budget. (“Did anyone miss out? Perhaps only the beekeepers of Australia,” quipped one cynical Liberal backbencher.)

The language also indicates Morrison wants to do what state and territory leaders have done – use the pandemic to pave the path to electoral victory.

The other point highlighted by the Today exchange is that Morrison was looking somewhat ragged.

This was accentuated by the contrast with Treasurer Josh Frydenberg who, on the face of it, would have been under the greater stress.

Frydenberg’s performances in the week of his third budget were smooth and, whatever nerves he felt, he appeared unfazed.

The week reinforced the impression he is in the box seat eventually to reach the prime ministership (assuming the Coalition lasts in government).

Pre-budget, he and wife Amie were out for the cameras on a Sunday charity run in Canberra. Post-budget, his staff rang around backbenchers to ask if they’d like a picture with the treasurer.

In question time, Morrison found old problems returning to irritate him. He was pressed on the two internal inquiries into who in his office knew or did what in relation to the Brittany Higgins matter, and he had to say neither was concluded (one had been on hold before this week while the police dealt with their investigation of her rape allegation). Whatever the results of these inquiries, Morrison needs to get them cleared away as soon as possible. They are “barnacles”.

Morrison has been travelling a lot recently and may be tired (although those around him say he’s energised by being on the road). Or he may not be used to sharing the limelight. Or the endless round of everything may be just taking its toll.

Then there’s the challenge of explaining this Labor-lite budget to the hardliners in the Liberal base and among the right-wing commentariat.

The budget has made the opposition’s already formidable task of carving out room for itself more difficult, but it is also proving a hard swallow for those rusted on to the Coalition’s old “debt and deficit” preoccupation.




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View from The Hill: Frydenberg finds the money tree


Many of these critics will be reluctant to buy the proposition the big spending must continue because the pandemic is a constant threat, given they’ve thought the threat was exaggerated in the first place.

The government could attempt to deal with these critics by saying it will “snap back” into tackling debt and deficit as quickly as possible.

But facing an election soon, it doesn’t want to do this, for obvious reasons.

In the budget the timing of the next stage, fiscal consolidation, is imprecise.

The budget papers say: “Progress on the economic recovery will be reviewed at each Budget update. This phase of the Strategy will remain in place until the economic recovery is secure and the unemployment rate is back to pre-crisis levels or lower.”

While some commentary is focused on how the Coalition has done a dramatic U-turn from its old debt-and-deficit rhetoric, there’s an opportunity for Labor to run a major scare campaign claiming it’s not a U-turn at all – that the debt truck is just in the parking lot.

Remember, it can say, when Tony Abbott promised no cuts to health, education and even the ABC – and recall what happened. This time, so the argument runs, cuts and savings will be Coalition priorities again as soon as it has secured the votes.

Morrison and Frydenberg this week have been invoking John Howard’s advice, given to Frydenberg in the early days of the pandemic, that “in times of crisis there are no ideological constraints”.

The question is whether the Liberals have softened their ideology, or just put it in storage during the crisis.

While there can be no definite answer, Tim Colebatch, writing in Inside Story. makes a strong case that the Coalition “won’t dump its political tactic of branding itself as the ‘fiscally responsible’ party and Labor as the party standing for deficits. This [budget] is a short-term tack that will be reversed after the election.

“Of course no government promising $503 billion of deficits in five years can be called fiscally responsible, so it will make cuts then to reclaim the brand,” Colebatch says.

Morrison and Frydenberg are both pragmatists rather than ideologues. But opinions in the wider party are also relevant, as Malcolm Turnbull found on the climate issue.

Frydenberg has pledged there will not be “any sharp pivots towards ‘austerity’”.

Nevertheless, there must be a budgetary reset at some point. And whether a pivot is sharp or not, and what amounts to “austerity” depend in part on whether you are one of the losers.




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Politics with Michelle Grattan: Simon Birmingham and Jim Chalmers on a big spending budget


The Conversation


Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Albanese’s $10bn pledge pushes housing needs back into the limelight


Hal Pawson, UNSWOpposition Leader Anthony Albanese’s budget reply speech last night highlighted Australia’s huge unnmet need for social and affordable housing. It’s once again shaping up as a major election issue. Labor is proposing a A$10 billion program to build 30,000 social and affordable homes over five years.

The immediate backdrop for the pledge is a post-COVID house price boom, and a continuing dearth of Commonwealth investment in new non-market housing. That is, rentals affordable to low-income Australians and provided by government agencies or non-profit community housing organisations.

Amid the many new spending plans revealed in Tuesday’s budget, Treasurer Josh Frydenberg maintained the government’s resistance to an ever-wider coalition of voices calling for social housing stimulus.




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Why more housing stimulus will be needed to sustain recovery



Conversation Economic Society of Australia survey, September 2020

Just how big is the problem?

With borders largely closed since March last year, it’s true that sharply reduced migration has temporarily dampened rental housing demand over the past 15 months. That in turn has generally subdued increases in rents. However, that national norm masks the rapidly rising rents seen in many regional markets during 2020-21.

And despite some local price reductions, Anglicare’s recent survey of 74,000 “lease ready” property listings identified only three (0.004%) affordable to a single person on the JobSeeker payment. More strikingly, for every household income type included in the survey, Anglicare found the availability of affordable lets even lower in early 2021 than a year earlier.

The broader and longer-term picture in the private rental market has been one of shrinking numbers of tenancies that low-income Australians can afford to rent. Specifically, we saw a 50% increase in the national deficit in private lets affordable to low-income renters (in the bottom 20% of incomes) in the decade to 2016.

A decade of negligible investment in social housing construction has only made this situation worse. The result has been a continued decline in availability as public and community housing has dwindled from 6% to only 4% of all housing since the 1990s. In fact, proportionate to population, social rental lettings have halved over this period.

A clear point of difference, but not a game-changer

Tuesday’s budget marked a continuation of the Morrison government’s near-exclusive housing focus on efforts to assist aspirational first-home buyers. Most significantly, this policy stance inspired the $2.1 billion HomeBuilder program as an economic recovery measure during 2020-21.




Read more:
Why the focus of stimulus plans has to be construction that puts social housing first


The ALP has pointedly backed both HomeBuilder and the smaller measures to assist first-home buyers announced on Tuesday. But Albanese’s new announcement seemingly extends Labor’s housing pitch beyond the Coalition’s comfort zone.

Anthony Albanese pledges $10 billion to build social housing in budget reply speech.

So is this the “major initiative” hailed by some headline writers? A “fix for house prices” it certainly is not. If unwisely attempted purely through public spending, the funding required to get into that territory would need to be many times as great.

Opposition housing spokesperson Jason Clare more defensibly describes the ALP pitch as “a significant start” in tackling Australia’s “housing crisis”.

The current national stock of social and affordable rental housing totals just over 400,000. In recent years annual additions have amounted to only 2,000-3,000. That’s barely enough even to offset continuing sales and demolitions. In these terms, Albanese’s pledge to expand the supply by 6,000 a year would indeed be significant.

At the same time, as our previous research has shown, a net increase of 15,000 units a year is needed just to keep pace with “normal” population growth – that is, to halt the decline in social rental as a share of all housing. Even under a post-pandemic scenario where migration rules are tightened as far as imaginable, that figure would not be substantially smaller.

So, like the Victorian government’s recently launched social housing stimulus, the ALP’s proposed national program would mark a promising break with the recent past, and a platform for further measures. But it would be hard to describe it as a game-changer.




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Victoria’s $5.4bn Big Housing Build: it is big, but the social housing challenge is even bigger


While greatly expanded social housing provision would be an essential part of any credible package to seriously address Australia’s housing affordability challenge, a far wider program of action is needed. Most importantly, such a program must also tackle our grossly unbalanced housing tax settings, boost renters’ rights and diversify the available choice of housing.

What the country needs above all is a Commonwealth commitment to assembling the national housing strategy that is so long overdue.




Read more:
Australia’s housing system needs a big shake-up: here’s how we can crack this


The Conversation


Hal Pawson, Professor of Housing Research and Policy, and Associate Director, City Futures Research Centre, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Budget package doesn’t guarantee aged-care residents will get better care


Shutterstock

Stephen Duckett, Grattan Institute and Anika Stobart, Grattan InstituteThe big investment in aged care announced in last night’s federal budget – an extra A$17.7 billion over five years – is a welcome response to the Royal Commission into Aged Care Quality and Safety. But even an investment of this scale does not meet the level of ambition set by the royal commission.

The government has committed A$6.5 billion for more home-care packages (about A$2.5 billion more for home care per year when fully implemented), and A$7.1 billion for residential-care staffing and services (about $2.4 billion more for residential care per year when fully implemented).

But the government has failed to outline a clear vision of what older Australians should expect of their aged-care system.




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Fewer hard hats, more soft hearts: budget pivots to women and care


Immediate fixes with no guarantees

The budget includes funding for 80,000 extra home-care packages over two years. The current home-care packages program has numerous problems, including nearly a 100,000-strong waiting list.

But the government has not explicitly promised to clear the waiting list and bring waiting times down to 30 days, as the royal commission called for.

The budget has some good news for people in residential aged care. The Basic Daily Fee (for services including food) will be increased by A$10 per resident per day, as called for by the royal commission.

And there’s more funding for better staffing, with mandates for an average of at least 200 minutes of care for every resident every day (40 minutes of which must be by a nurse) by 2023.

This is a good start, given nearly 60% of residents presently get less than this. But residents will have to wait two years – not one, as recommended by the royal commission – before they get more care hours.




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If we have the guts to give older people a fair go, this is how we fix aged care in Australia


The budget also provides additional funding to improve the aged-care workforce. The government will subsidise the training of new and existing aged-care workers, including 33,800 places to attain Certificate III.

But the government has not gone far enough in supporting the workforce. It stopped short of guaranteeing that every staff member providing care for older Australians will be trained to a minimum Certificate III level, and that all residential aged-care facilities will have a registered nurse on site 24 hours a day.

The budget commitments appear to be a once-off, with workforce funding plummeting to only A$86.5 million in 2024-25, compared to A$293.3 million in 2022-23. And there is no commitment to lift carers’ wages.

Residents won’t have access to a registered nurse 24 hours a day.
Shutterstock

Small steps towards a better system

The royal commission made it clear the aged-care system needed to be reformed from top to bottom. The government’s announcements foreshadow a shake-up of the system over five years. But the extent of reform is yet to be determined.

The budget papers show funding will be up by about A$5.5 billion per year once most reforms are in (see the chart below). That’s not enough to create a needs-driven, rights-based system, called for by the royal commission and the Grattan Institute.


Federal budget paper 2

The government has committed to a new Aged Care Act, to be legislated by mid-2023, though the details are yet to be filled in. This Act must put the rights of older Australians at its heart.

The government has also committed to designing a new home care program and will provide a single assessment process for both home care and residential care.

More home-care packages will be available but there won’t be enough for all those currently on the wait list.
Shutterstock

A local network of health department staff will be embedded in the regions, and there will be a network of 500 “care finders” to help older Australians get the support they need.

But the biggest risk to achieving real structural change is governance and transparency. Here, the government has fallen short.




Read more:
4 key takeaways from the aged care royal commission’s final report


The government does not support the establishment of an independent aged care commission. Most disappointingly, it is pumping A$260 million into the Aged Care Quality and Safety Commission, which the royal commission found had demonstrably failed.

While some transparency will be provided through public reporting of staffing hours and star ratings to compare provider performance, clear transparency measures will be needed to ensure the additional billions don’t end up boosting providers’ profits.

The good news from budget 2021 is that the journey has begun. The government has made a substantial down payment to allow development of a new aged-care system. We must hope that more will follow, so the neglect ends and every older Australian can get the care and support they need.The Conversation

Stephen Duckett, Director, Health Program, Grattan Institute and Anika Stobart, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Did someone drop a zero? Australia’s digital economy budget spend should be 10 times bigger


Marek Kowalkiewicz, Queensland University of TechnologyThe federal budget for 2021-22 promises A$1.2 billion over the next six years to support the Digital Economy Strategy, a plan to make Australia “a leading digital economy and society by 2030”.

The Digital Economy Strategy proclaims

We are well placed to be a leading digital economy and have strong foundations, but many countries are investing heavily in their digital futures.

This may sound like a lot, but a closer look at the strategy and funding announcements, compared with what other countries are doing, shows we may not be so well placed after all.

Countries such as France and Singapore have implemented similar initiatives, with one key difference: they are spending about ten times as much money as Australia.




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Cuts, spending, debt: what you need to know about the budget at a glance


The world picture

To see how Australia compares worldwide, we can look to the most comprehensive global analysis of the digital evolution of nations, the Digital Intelligence Index produced by researchers at Tufts University in the United States.

This index looks at many factors, such as digital payment and logistics infrastructure, internet usage, regulations and research, to give each country scores for the current state of its digital economy and also how fast the digital economy is developing.

In the 2020 edition, Australia ranked as the 17th digital economy in the world — behind Sweden, Taiwan, New Zealand, and the leading nation, Singapore. In 2017 Australia came 11th, so we are already dropping down the rankings.

Just to maintain our position, we need to improve at least as rapidly as those behind us. Prime Minister Scott Morrison has acknowledged this, noting “we must keep our foot on the digital accelerator to secure our economic recovery from COVID-19”.

However, the Digital Intelligence Index ranks Australia 88th of the 90 countries analysed when it comes to our speed of improvement. The only two countries slower than Australia are Hungary and Nigeria, and there are 87 digital economies developing faster than us.

Since 2017, countries such as Slovenia, Egypt, Greece and Pakistan, which used to grow more slowly, are moving faster, increasing the pressure from the back of the pack.

Denmark and Sweden, two countries ahead of us in the Digital Evolution ranking above, used to grow slower, giving us a chance to overtake them. Not anymore. They have now picked up speed, and are increasing the gap we need to cover even to catch up with them.

The right ideas, but not enough funding

The Digital Economy Strategy package, announced in the budget, covers a broad range of initiatives. They are grouped into eight priorities, covering education, support for small and medium enterprises (SMEs), cyber security, artificial intelligence (AI), drone technologies, data sharing, support of government services, and tax incentives.

It is promising to see government’s dedicated investment, particularly in securing future skills and building Australia’s AI capability. But it is concerning to see the spending on some priorities fails to reflect the importance of these topics.

The federal government recognised the need for upskilling Australians. According to the Australia’s Digital Pulse report compiled by Deloitte and the Australian Computing Society, we will need 60,000 new technology workers every year for the next five years, just to meet the growing demand. Yet only 7,000 students graduated with IT degrees in Australia in 2019.

The new budget will support graduate and cadet programs, including through additional funding assigned to AI. Unfortunately, the government’s new programs will barely put a dent in our projected skills shortage of about 50,000 workers annually. The new programs will provide scholarships for only up to 468 graduates over a six-year period.

Artificial intelligence is another key topic. AI is upturning industries globally, and creating opportunities for emerging and transforming businesses. The federal government allocated $124.2 million to this priority, distributed among initiatives lasting between four and six years.

Compare this with France, which has allocated €1.5 billion (A$2.3 billion) to AI initiatives running between 2018 and 2022. Given France’s economy is roughly twice the size of Australia’s, an equivalent commitment from Australia would be slightly over A$1 billion — almost 10 times the promised A$124.2 million.

Not enough funding for private enterprise

A huge chunk of the $1.2 billion promised in the budget will be spent on the Enhancing Government Services Delivery priority. Aside from two small expenses of $13.2 million, it consists of just two large initiatives.

The first will deliver an enhanced version of the government’s online service platform, myGov. The second is for digital health, funding My Health Record and Australian Digital Health Agency activities. Together, they will consume more than half of the entire Digital Economy Strategy budget.


This seems grossly unbalanced and skewed toward digital transformation of the public sector, rather than supporting Australia’s digital economy holistically.

Are we really keeping our foot on the digital accelerator, or just pretending to?

We need to do better

Australia’s budget spending on the Digital Economy Strategy for 2021-22 is planned to be just shy of $500 million (with the remainder of the announced $1.2 billion to be spent over the following five years). That’s less than 0.1% of Australia’s entire projected budget spending. How does it compare to leading digital economies?

In Singapore (the world’s top digital economy), a single initiative to support organisations in adopting digital solutions and technologies received S$1 billion (A$960 million) in funding this year. That’s just shy of 1% of Singapore’s entire budget in 2021. Again, the commitment is around ten times higher than Australia’s investment.

To stop sliding down the rankings, Australia needs to put its (our) money where its mouth is. Countries ahead of us (Singapore) and behind us (France) are investing ten times as much as we do in digital economy initiatives.

Are we really well placed to be a leading digital economy? Like so much in life, you get what you pay for.




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To change our economy we need to change our thinking


The Conversation


Marek Kowalkiewicz, Professor and Founding Director of QUT Centre for the Digital Economy, Queensland University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia: Budget 2021


Frydenberg spends the budget bounty to drive unemployment down to new lows


Peter Martin, Crawford School of Public Policy, Australian National UniversityNever before has a budget spent so much to supercharge the economy after the worst of a recession has already passed.

The economy bounced back from last year’s COVID recession far more sharply than the treasury (or just about anyone else) expected.

The bounty from the higher-than-expected tax collections that flowed from more people than expected in work, a much higher-than-expected iron ore price, and lower than expected unemployment benefits, should amount to A$26.8 billion this financial year, $15.5 billion the next, and $18.6 billion the year after that.

But rather than bank those riches and improve the budget bottom line, as the Coalition’s budget strategy used to require it to do, the government has instead decided to spend the lot.



It will spend $21 billion of this year’s $26.8 billion; it will spend or give up in new tax concessions $26.9 billion — far more than next year’s $15.5 billion bounty, and so on.

Treasurer Josh Frydenberg has come good on his historic promise to keep spending way beyond the crisis, to drive the unemployment rate down below where it was when the pandemic started.




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View from The Hill: Frydenberg finds the money tree


The budget predicts an unemployment rate of 4.75% by mid-2023 and 4.5% by mid-2024.

If delivered (and the treasurer’s revised strategy published in the budget requires him to keep spending until it is), it will mark what the budget papers describe as, “the first sustained period of unemployment below 5% since before the global financial crisis, and only the second time since the early 1970s”.



In the same way as Australia emerged from the early-1990s recession with a dramatically lower inflation rate because the Reserve Bank was determined to salvage something from the carnage, Frydenberg has decided to exit the COVID recession with an ongoing lower floor under unemployment.




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Less hard hats, more soft hearts: budget pivots to women and care


Both the treasury and Reserve Bank believe Australia can sustain much lower unemployment than the 5-6% it has grown used to. The treasury’s estimate is 4.5%; the Reserve Bank’s is nearer 4%. Before COVID, the United States managed 3.5%.

If achieved, it will mean hundreds of thousands more Australians providing services, drawing paycheques, and paying tax. And no longer on benefits.



A dramatic budget graph tracking the fortunes of every Australian whose payroll was reported to the tax office throughout 2020 shows the biggest victims of the COVID recession — by far — were those without post-school education. At the deepest point of the COVID recession in May, they were almost three times as likely to have lost their jobs as Australians with degrees.

The budget provides an extra $400 million for low-fee or no-cost training for jobseekers, to be matched by the states; an extra $481 million for the transition to work employment service directed at Australians aged 24 and under; and a further $2.4 billion to the Boosting Apprenticeship Commencements program.




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Budget 2021: the floppy-V-shaped recovery


But most of what it intends to do for jobs is the indirect result of a barely precedented expansion in spending and tax concessions in all sorts of areas.

The extra $17.7 billion it is spending on aged care over four years ought to create many jobs, as should the extra $13.2 billion it is spending on the National Disability Insurance Scheme.

The $1.7 billion it is spending on making childcare more affordable should both create jobs in the sector and free up more parents to return to work.

An extra $20 billion in business tax concessions should help as well.




Read more:
Cuts, spending, debt: what you need to know about the budget at a glance


The budget’s break with the past isn’t its dramatic expansion of discretionary spending. That’s common in recessions. What’s unusual is that spending is being ramped up when we are not in recession.

In the words beloved of economists, the spending is “pro-cyclical” rather than “counter-cyclical”. It is designed to supercharge our exit from recession rather than merely bring it about.

And there’s little sign of the spending stopping.

If this government or the next achieves success in driving the unemployment rate down to 4.5%, it will want to go further. It will keep going further right up until we get inflation near the top of the Reserve Bank’s 2-3% target band and wage growth in excess of 3%, neither of which this budget foresees in forecasts going out four years.




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Budget splashes cash, with $17.7 billion for aged care and a pitch to women


Government debt, anathema to the Coalition when Labor ran it up during and after the global financial crisis, isn’t much of a constraint.

The Reserve Bank holds much of the government’s debt (it didn’t during Labor’s time) and is buying as much as it needs to to keep interest rates low. Recently, interest rates have been rising, but not for most of the government’s borrowings, which are long-term.

The budget papers show that even with net government debt at 34% of GDP and heading to 44%, interest payments on that debt are much less of a drain on the budget than they were back in the mid 1990s when net debt hit 18% of GDP.



And the times have changed. Worldwide, few nations have an aversion to government debt, especially not the United States. In Australia, the only side of politics that used to complain about debt is in currently in office.

Before COVID, the fiscal strategy spelled out in the budget as part of the Charter of Budget Honesty required the government to eliminate net debt.

Frydenberg’s revised strategy merely requires him to stabilise and then reduce net debt “as a share of the economy”.

His priority is driving down unemployment. If that helps expand the economy and so drives down net debt as a share of the economy so much the better. But he wants to do it regardless.

The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Budget splashes cash, with $17.7 billion for aged care and a pitch to women


AAP/Mick Tsikas

Michelle Grattan, University of CanberraThe Morrison government has brought down a big-spending, expansionary budget that forecasts Australia’s unemployment rate will fall to 4.75% in two years time.

But Australia’s international borders won’t be properly open for at least a year, according to the budget’s assumptions.

“Australia is coming back,” Treasurer Josh Frydenberg told parliament on Tuesday night.

“Employment is at a record high, with 75,000 more Australians in jobs than before the pandemic.

“This budget will help to create more than 250,000 jobs by the end of 2022-23,” Frydenberg said.

“This budget secures the recovery and sets Australia up for the future.”




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The deficit for next financial year is expected to be A$106.6 billion, with cumulative deficits of $342.4 billion over the forward estimates.

As the government continues to spend to underpin the recovery, net debt will increase to 30% of GDP at the end of June, before peaking at 40.9% at June 30, 2025.

Aged care centrepiece

The centrepiece of Frydenberg’s third budget – which had been largely pre-announced by the government – is a $17.7 billion aged care package, spent over five years and including 80,000 extra home care packages.

Frydenberg said this would make a total of 275,000 packages available. The present waiting list is 100,000.

The aged care package is designed as long term structural reform after the royal commission found the system in a parlous state and needing a comprehensive overhaul.

“We will increase the time nurses and carers are required to spend with their patients,” Frydenberg said.

“We will make an additional payment of $10 per resident per day to enhance the viability and sustainability of the residential aged care sector.

“We will support over 33,000 new training places for personal carers, and a new Indigenous workforce.

“We will increase access for respite services for carers.

“We will strengthen the regulatory regime to monitor to monitor and enforce standards of care.”

In other major initiatives, there is $2.3 billion for mental health, while the earlier-announced adjustment to the JobSeeker rate will cost nearly $9.5 billion over the budget period.

Tax cuts and a focus on women

Some 10.2 million low and middle income earners will benefit from the extension of the tax offset for another year, at a cost of $7.8 billion.

As Morrison seeks to repair his image with women, there is a range of measures on women’s safety, economic security, health and wellbeing totalling $3.4 billion.

This includes $1.7 billion for changes to child care, $351.6 million for women’s health, and $1.1 billion for women’s safety.

There will be another $1.9 billion for the rollout of COVID vaccines.

Quizzed at his news conference on the future of Australia’s closed border, Frydenberg hedged his bets. “When it comes to international borders, it’s an imprecise business.”

The budget papers assume a gradual return of temporary and permanent migrants from mid-2022, and small arrivals of international students, starting late this year and increasing from next year.

“The rate of international arrivals will continue to be constrained by state and territory quarantine caps over 2021 and the first half of 2022, with the exception of passengers from Safe Travel Zones.

“Inbound and outbound international travel is expected to remain low through to mid-2022, after which a gradual recovery in international tourism is assumed to occur,” the papers say.




Read more:
Budget 2021: the floppy-V-shaped recovery


The budget is heavy on continued help for business, with more than $20 billion extra in support.

With the country facing a skill shortage and skilled workers not able to enter, Frydenberg said the government would create more than 170,000 new apprenticeships at a cost of $2.7 billion.

“We will help more women break into non-traditional trades, with training support for 5,000 places,” he said

There will be 2,700 places in Indigenous girls academies to help them finish school and enter the workforce.

More STEM scholarships will be provided for women.

Another 5,000 places are being made available in higher education short courses.

Housing and support for retirees

The budget’s housing package includes another 10,000 places under the New Home Guarantee for first home buyers who build or buy a newly-built home. It will also increase the amount that can be released under the First Home Super Saver Scheme.

From July 1, 10,000 guarantees will be provided over four years to single parents with dependants to build or buy a home with a deposit as low as 2%.

Retirees will benefit from a measure to encourage them to downsize.

Older people will no longer have to meet a work test before they can make voluntary contributions to superannuation. People aged over 60 will be able to contribute up to $300,000 into their superannuation if they downsize.

Given the housing shortage, this is aimed at freeing up more housing for younger people.

The government will also enhance the Pension Loan Scheme by providing immediate access to lump sums of $12,000 for single people and $18,000 for couples.

Although modest, one measure that will help women, who retire on average with much less superannuation than men, is that the government will remove the $450-a-month minimum income threshold for the superannuation guarantee.

Frydenberg said the government was committing another $15 billion over a decade to infrastructure, including roads, airports and light rail.

There is also $1.2 billion for multiple measures to promote the digital economy.

Labor says it’s ‘just more of the same’

The opposition was dismissive. Anthony Albanese said, “Australians have endured eight long years of flat wages, insecure work and skyrocketing cost of living under the Liberals and Nationals – and this budget does nothing to change that.

“It’s just more of the same from a tired old government.”

The Business Council of Australia welcomed the budget, saying it “strikes a prudent balance between growth and fiscal discipline by making sensible investments in the levers of growth”.

But the ACTU said while the Coalition’s rejection of austerity was welcome, “the government has failed to use the spending in this budget to tackle the underlying problems of low wages and insecure jobs”.

Instead, it was “handing billions of dollars to business including in the critical areas of aged care, mental health and vocational training, with little accountability or strings attached”.

The Australian Aged Care Collaboration, which represents more than 1,000 providers, congratulated the government on agreeing to implement most of the royal commission’s 148 recommendations.

AACC representative Patricia Sparrow said “after 20 government reviews in 20 years, this budget, and the government’s response to the royal commission’s recommendations, finally addressed many of the challenges facing aged care”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Less hard hats, more soft hearts: budget pivots to women and care


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Danielle Wood, Grattan Institute and Tom Crowley, Grattan InstituteLast year’s post-budget photo ops were all heavy machinery and hard hats. But this year we can expect soft-focus shots with children and the elderly.

The big story of the budget is not just that the government is spending tens of billions more as we emerge from the recession; it is also the major shift in what the money will be spent on.

The change in fiscal strategy – from a “construction-led recovery” last year to a concerted emphasis on women and the care sector this year – is based on solid economic advice.

It has also come at the best possible time for a government that has been in the spotlight for underfunding aged care and mental health, and under pressure to do more to support women’s economic participation.

The treasurer was understandably eager to emphasise the Government’s new spending initiatives. And the shift is notable.

But while there is welcome progress, the budget falls short of delivering big structural reforms that are needed for childcare, aged care, and mental health.

Budget delivers on social spending

For childcare, the government has announced an extra $1.7 billion over three years starting from July 2022, a modest boost to the $9 billion the government spent last financial year.

We proposed a more ambitious package, which would have spurred big economic gains from higher female workforce participation.

The budget falls short of that, but it is still well targeted at the families that face the most crippling out-of-pocket childcare costs: those with two or more children under six in care.



For aged care, there is an extra $17.7 billion over four years, a significant increase to the $22.5 billion the government spent last financial year.

While not enough to deliver the Aged Care Royal Commission’s vision of a full rights-based model – where every Australian is entitled to the care they need – it still offers improvements.




Read more:
Budget splashes cash, with $17.7 billion for aged care and a pitch to women


The 80,000 new home care packages will help to reduce waiting times, and the boost to front line care minutes and the Basic Daily Fee provides additional support to those in residential care.

The accompanying focus on attracting, training, and up-skilling staff is particularly welcome given that the Royal Commission anticipates future staff shortages, although the Budget doesn’t have much specific to say about pay in the sector.




Read more:
View from The Hill: Frydenberg finds the money tree


For mental health, a sector whose problems have been laid bare by increased demand for services during the pandemic, there is an extra $2.3 billion over four years.

Funding is targeted towards expanding access to mental health services and bolstering suicide prevention, but it falls short of the system reform required.

A women-centric makeover

The budget flags $3.4 billion over four years for women’s measures (including childcare). Outside of childcare, the biggest are for women’s health ($365 million) and spending on women’s safety including and violence prevention ($1.1 billion).

These measures, particularly the increased spend on front line and response services for family violence are important and significant.

But the more significant shift for women comes with the recognition that job-creating budgets need to invest in a broader range of jobs including in services sectors. About 80% of Australians work in services (and 90% of working women), so investing in these jobs ensures a broader recovery than the previous hard-hat focus.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


While last year’s Budget ran hard on infrastructure and investment tax breaks that favour capital-intensive sectors, this time around there is a stronger focus on care economy jobs through the spend on aged care, childcare and mental health.

Even the extended JobTrainer scheme receives a care-centred makeover, with an additional 33,800 low fee and free training places set aside to support future aged care workers.

Services sectors hit hard by COVID also receive some cash including the already announced $1.2 billion support package for the aviation and tourism sector and $300 million for the creative and cultural sector. Universities again miss out but private education providers also receive additional supports.

The long-term challenge

Other major measures in the Budget include the rollover of the Low and Middle Tax Offset (the ‘lamington’) for another year – delivering up to $1080 into the hands of low- and middle-income taxpayers next year – and extension of two key business tax measures: instant expensing and loss carry backs – focused on bringing forward business investment.

The challenge is that much of this increased spending is permanent.

And when combined with the impact of COVID on migration and on the size of the economy, this leaves the medium-term forecasts looking markedly different to the (probably unrealistic) ones that voters were served up before the 2019 election.



But, as the Parliamentary Budget Office suggested a fortnight ago, even with this shift, Australia’s debt levels are sustainable and are likely to remain so. Net debt is forecast to stabilise and then fall over the medium term, even with continuing deficits.

This doesn’t mean that long-term structural challenges disappear, but it does mean that there is more breathing space for the government to let voters see its softer side. As an economic as well as political strategy, it makes a lot of sense.


The Conversation

Danielle Wood, Chief executive officer, Grattan Institute and Tom Crowley, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: Frydenberg finds the money tree


Wes Mountain/The Conversation

Michelle Grattan, University of CanberraJosh Frydenberg’s third budget aims to give Australia a post-pandemic soft landing, using revenue windfalls for spending and tax cuts rather than for slashing the deficit.

Its philosophy is very much gain, not pain, for a population that has endured the stress of the pandemic, albeit not the devastation experienced by so many other countries.

There are plenty of winners, and minimal direct losers in a budget that lays the ground work for an election that is still expected next year rather than this.

Hard decisions have been eschewed. Prime Minister Scott Morrison is trying to avoid offending voters.

The political prism of this budget is very much in the moment. As such, it leaves Opposition Leader Anthony Albanese little room. Excessive criticism, and he risks sounding carping. Demands for too much more, and he might be accused of irresponsibility.

The $7.8 billion extension of the low and middle income tax offset is a carrot for Labor’s core constituency. Frydenberg told reporters the recipients were “the tradies and the truckies,” and “the teachers and the nurses”.

The budget dodges major reform, with the notable exception of aged care, which the royal commission’s scathing findings made unavoidable.




Read more:
Budget splashes cash, with $17.7 billion for aged care and a pitch to women


The deficit for the coming financial year is forecast to be $106.6 billion, only marginally below the December budget update forecast of about $108 billion.

Tens of billions of dollars in windfall revenue (from the faster-than-expected economic recovery, and high iron ore prices) have been distributed, rather than going to the bottom line.

At the end of the budget period, in 2024-25, the deficit will be an estimated $57 billion. Indeed, there is no surplus in sight in a decade.

Without a policy U-turn, Frydenberg as treasurer will likely never deliver that “back in black” budget. Indeed, by the time there is a surplus, he might have served as prime minister, been in opposition, and departed politics.

But of course, after the next election, at some point there will be a change of policy, towards fiscal consolidation.

Frydenberg presents an optimistic picture for the economy in the coming financial year, with the caveat that the pandemic lurks and therefore so does uncertainty.

The budget forecasts unemployment falling to 5% next year and dropping to 4.5% by June 2024. Growth peaks at 4.25% next financial year, but slows after that.

Critics will say that given the state of the economy, and the amount of revenue, budget repair is being delayed too long. That won’t, of course, be the judgement of the public.

We can apply many measuring sticks to the budget, beyond the spending-versus-repair one.

The most obvious is its response to the aged care royal commission. The government is putting some $17.7 billion into the system, and there will be 80,000 additional home care packages (the waiting list is 100,000).

The experts will argue over the money and probably conclude it is not enough. Equally, the test must be whether the initiatives adequately address improving regulation and achieving a larger, better trained and remunerated workforce. The government makes the right noises but the judgement can only come later. The workforce issues are particularly challenging.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The size of the task is enormous, with a planned new funding model to improve quality and a goal of cultural reform. Health Minister Greg Hunt on Tuesday described it as a “once in a generation” reform. The program will take five years.

As foreshadowed, there are many initiatives for women – on safety, health and economic security. Reforms to child care benefit families, but women especially will be making comparisons with the more generous, less targeted Labor scheme.

Many individuals and businesses will be scrutinising the budget for what it says about opening Australia back to the world.

The message is that it will be a slow path.

Migrants, temporary and permanent, will gradually start to come from mid next year.

Late this year, “small phased programs” of international students will start.

Inbound and outbound travellers will remain low for the next year.

But hey – it’s assumed “a population-wide vaccination program is likely to be in place by the end of 2021”. Let’s hope this is so – but it’s only an assumption.

By the end of next year, barring a fresh assault by the pandemic, we might – just might – be looking at more normality. And then we will be facing a more “normal” budget too, with its share of nasties.


The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Budget 2021: the floppy-V-shaped recovery


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Richard Holden, UNSWI don’t often feel sorry for politicians. But having to manage a process that produces forecasts about the next four years of an economy still clawing its way out of a pandemic, and then having to publicly defend those forecasts, is no easy task.

That said, our compassion for the plight of Treasurer Josh Frydenberg shouldn’t stop us judging his budget forecasts. And, like all forecasts, those rest heavily on the assumptions that underpin them.

Core budget assumptions

The core budget assumptions about unemployment and economic growth are relatively rosy. Unemployment is forecast to be down to 4.75% by 2023-23 and 4.5% the year after – both well below pre-pandemic levels.

Real GDP growth is expected to rebound to 4.25% in 2021-22 and then settle down to about 2.5% thereafter. Given we are unlikely to have the population growth of the pre-COVID era, that’s a pretty high rate.

Taking a look graphically at actual and forecast GDP makes it clear why folks are talking about a “V-shaped recovery”. But even the fairly bullish assumptions reveal a recovery where the V isn’t really sharp enough. Call it a “floppy-V-shaped recovery.”



That’s rather disappointing, especially given Frydenberg has fundamentally shifted Liberal party fiscal strategy away from “debt and deficits” and dalliances with austerity, to one that sees government spending at more than 26% of GDP in steady state.

But what is more disappointing is that this increased spending isn’t forecast to translate into stronger employment and wages growth.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The budget forecasts an unemployment rate of 4.5% in 2023-24 and 2024-25. That’s better than pre-pandemic levels, but not all that close to the 4%-or-lower number many economists (including RBA governor Philip Lowe) think might be required to get wages growing meaningfully for the first time since 2013.

The budget forecasts reflect this, with wages growth of 2.25% in 2022-23 and 2.5% in 2023-24 both equal to forecast inflation in those years. That is, real wages growth is not even forecast to begin again until 2024-25—and even then, only barely.

Non-mining business investment is forecast to grow by 1.5% in 2021-22 and then jump by a massive 12.5% in 2022-23. That might reflect a post-COVID investment boom driven by a widely mRNA-vaccinated nation and a raft of government incentives. Or it might just be wishful thinking.




Read more:
View from The Hill: Frydenberg finds the money tree


As to immigration, we can expect our borders to be largely shut for the foreseeable future. This is reflected in the budget’s forecast population growth of “around 0.1% in 2020-21, 0.2% in 2021-22 and 0.8% in 2022-23.”

Whether immigration does actually pick up significantly in 2022-23 depends crucially on our vaccination rollout.

If we can reverse the bungled execution to date, overcome vaccine hesitancy, and secure enough Pfizer and Moderna doses (including for boosters) immigration might grow strongly again.




Read more:
Less hard hats, more soft hearts: budget pivots to women and care


But there are a number of things that have to go right for that to happen. And the government has a poor track record to date on those things.

And then there’s one notable assumption that makes news in every budget: the iron-ore price. The budget papers themselves highlight the importance of it, noting:

“The recent strength in key commodity prices, particularly iron ore, has seen a significant resurgence in Australia’s terms of trade […] As a result, nominal GDP is expected to grow by 3¾% in 2020-21, by a further 3½% in 2021-22 and by 2% in 2022-23.”

The budget assumes the iron-ore price will decline from its current level of over US$200 a tonne, to US$55 a tonne by March 2022. This incredibly pessimistic assumption basically gives the government a buffer on the headline deficit figure. If the forecast of a $99.3 billion deficit in 2022-23 is beaten significantly, it will likely be due to iron ore prices staying high.

The biggest assumption of all

The core economic assumptions discussed above underpin the budget bottom line – a number that used to receive considerably more attention when there was a question of “when” the budget might be back in surplus.

Those days are gone.

Frydenberg has engineered a remarkable shift in Liberal party economic philosophy. While maintaining their brand as “the party of lower taxes, not higher taxes”, they have jettisoned budget-balance fetishism.




Read more:
Cuts, spending, debt: what you need to know about the budget at a glance


Good. It’s about time.

But the biggest assumption of all in the out years of the budget is that the government – should it be reelected – sticks to this new strategy. If they do it holds the promise of being transformative.

It would represent a modest but welcome transformation of the economy, and a dramatic transformation of the Liberal Party brand.


The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.