Michelle Grattan, University of CanberraThe government has failed to get any electoral “bounce” from last week’s budget, despite it being widely seen as good for the economy, according to Newspoll.
Labor retains a two-party lead of 51-49%, although there was a 2 point fall in its primary vote, to 36%. The fall was matched by a 2 point rise in support for the Greens, to 12%.
The Coalition was stable on 41% primary vote.
Publishing the results, The Australian reported it was the most well-received budget since the Howard-Costello days, with 44% saying it would be good for the economy, and only 15% believing it would be bad. This was the largest margin since 2007.
But voters found it harder to get a clear fix on what it would mean for them personally. They were evenly divided, with 19% each side, on whether they would be personally better or worse off financially from the budget.
A record 62% could not say whether they would be better or worse off.
While the budget contained tax cuts for low and middle income earners and a child care package, much of the big spending was directed to particular areas, such as aged care and mental health, rather than affecting the financial position of people more widely.
Both leaders’ personal approval ratings worsened somewhat in the poll, although Anthony Albanese took more of a hit than Scott Morrison.
Dissatisfaction with Albanese increased 3 points to 46%, while his satisfaction rating decreased a point to 39%. His net rating is minus 7.
Satisfaction with Morrison fell a point to 58%, and dissatisfaction increased a point to 38% His net approval is plus 20.
Morrison led Albanese as better prime minister 55% (down a point) to 30% (stable).
In Queensland selling the budget, Morrison said on Sunday: “The recovery cannot be taken for granted. The recovery can be lost. The hard won gains of Australians, particularly over these last 18 months, can be lost unless we keep doing what’s working. And this is working.”
Also in Queensland, Albanese said: “Quite clearly, Scott Morrison has a plan to just get through the next election and then we’ll see cuts, because we know from this government, just like we saw in 2014 when it first came to office, that they will make cuts, they will return to type.”
John Shine, Garvan InstituteThe story of the past year has been the pandemic: from the first outbreaks in early 2020, the identification of the SARS-CoV-2 virus and methods to detect it, through to lockdown and quarantine measures, vaccine development, testing and finally distribution. The pandemic is not over, but the recovery has started.
At each stage, it has been scientists and researchers at the forefront of a rapid and successful national and global response to the pandemic. A nation’s capacity to respond to threats like a pandemic does not exist in a vacuum. It depends on scientists. You can’t research a solution without researchers.
In Australia, the higher education sector performs the vast bulk of research, including basic foundational research. This sector has been hit extremely hard by the pandemic, losing billions in revenue leading to the loss of research capacity — the very capacity we need to continue to respond to the pandemic and recover.
For this reason, the lack of recognition for science and scientists in the federal budget, and in particular for the foundational capacity in basic discovery science, is perplexing indeed. Such science capability underpins Australia’s resilience, not just against pandemics but also against natural disasters, economic shocks, technology disruption, the needs of an ageing population, and cyber warfare – many of the government’s stated priority areas.
There is some new funding in the budget, which is welcome. Initiatives such as support for the Square Kilometre Array radiotelescope, supporting women in STEM, climate adaptation, clean energy and government digital resources are essential additions to the Australian scientific landscape. The proposed patent box system promises to stimulate investment in Australian science in medical technologies and clean energy.
Much of this funding is for incremental, short-term, focused technology programs. But such mission-directed science, while worthy, does not substitute for discovery science. If the government wants these missions to be effective, it must invest in basic science too.
If universities are being asked to pivot away from over-reliance on international student income, and towards research commercialisation, there must be a basic science pool to help fuel this translation of research findings into commercial outcomes. At the risk of mixing metaphors, the pivot will be ineffective without a pipeline.
More importantly, the budget does nothing to stem the loss of university science jobs. Failure to act on university funding before the start of the 2022 academic year will mean more university job losses – and it is clear from the decisions already taken at ANU (in science and medicine), Melbourne, Macquarie and Murdoch that these cuts will come from science research.
Medical manufacturing capability
While the government has not revealed in the budget how much money it has committed to onshore mRNA vaccine manufacturing, it is welcome news that there is commitment to developing this capability that will serve the nation well for decades.
The Australian Academy of Science is pleased the government has heeded our advice to future-proof Australia by developing this capability. It will allow Australia to build resilience against future pandemics and potential biosecurity threats that require us to have the onshore capacity to mass-produce vaccines.
Australia will require significant capability development alongside a manufacturing facility. A pipeline of knowledge will need to be developed, from fundamental to applied research related to mRNA vaccines and therapeutics. Australia will need a nationwide consortium of multidisciplinary expertise, in everything from data science to materials engineering, to become a world leader in this new technology.
Building our research capability in this area will allow us to continue solving existing challenges with mRNA vaccines. That’s why the science sector must be included in the scoping and investment in this new capability.
When I was appointed president of the Australian Academy of Science in 2018, I spoke about how it can take decades to translate the outcomes of basic research into something of real value for the community. This remains the case. It has always been the case.
Often, our political leaders want instant answers to the big questions. Australia’s science and research community delivered when it came to COVID-19, but it must be supported and funded to continue making fundamental discoveries if it is to deliver again. The future prosperity of our nation depends on it.
The initial vaccination road map was derailed in part due to poor logistics, but more so due to lack of supply and sheer bad luck. Prioritising the AstraZeneca vaccine, with its local manufacturing capacity, seemed like a good bet but this was derailed by the rare — but real — possibility of blood clots.
The announcement overnight of 10 million doses of Moderna mRNA vaccine this year, and 15 million next year, suggests we will see AstraZeneca quietly shuffled off stage and replaced with Moderna. However, it is unlikely to impact the current timeline.
About half of these people are 50+ or priority populations, and the other half are under 50. So that means 15 million doses before September 30 (assuming we continue using AstraZeneca), and 15 million doses from October 1, when greater stocks of the Pfizer and Moderna vaccine become available in the fourth quarter of the year.
From now until September 30, we have 100 weekdays left to deliver 12.2 million vaccine doses, or 122,000 per day.
This is twice as many doses per day as we achieved in the past week. But it’s doable if we ramp up our vaccination capacity.
From October 1 to December 24, we have about 15 million doses to administer to vaccinate 75% of all remaining adults. This will mean 250,000 vaccinations per weekday, so doubling the daily number again in the “sprint”.
Again, this is doable if we get all our mass vaccination hubs well-oiled and efficient before then. And probably use weekends, too.
Where it gets more challenging is if many people 50 and over elect to wait for Pfizer or Moderna, meaning an even bigger “sprint”. That would require an extremely reliable supply of these two vaccines before Christmas, well-oiled delivery systems and mass vaccination sites to deliver in excess of 300,000 doses per weekday.
This implied goal of offering vaccines to all adults by the end of 2021 is ambitious, but not impossible.
So when could we open borders?
Australia will still not have COVID-19 resilience (or “herd immunity”, or something approaching it) by the end of 2021.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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 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.
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.
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.
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.
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.
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.
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.