Australia Decade of budget deficits ahead as government spends billions to recover pandemic-hit economy
NT Budget boosted by national GST improvements, but financial books still stained in red
The Northern Territory government has announced significant improvements in its debt and deficit levels, largely off the back of a re-energised national economy. But the Budget books will still be stained in red for at least a decade.Despite the improvements, the Budget books are still stained in red, with no surpluses forecast for at least the next decade.
The Treasurer has declared Australia's economic engine is "roaring back to life" as he unveiled tens of billions in new spending in a budget that could be the Coalition's last before a federal election.
The government is pitching its second pandemic budget as solely focused on Australia's recovery from the COVID-19 pandemic and recession.
That will see a decade of deficits and debt that's set to peak at almost $1 trillion in 2025.
In its bid to drive jobs growth, the government is targeting areas where there are skills shortages, like child and aged care.
Promises, promises. Josh Frydenberg made a lot in last year’s budget, but did they stack up?
There were a few fails — JobMaker, women — but by getting the iron ore price wrong, the treasurer gained many billions for his coffers.But seven months later, many of Frydenberg’s signature splashes — wage subsidies and women’s economic security — have failed to have a big impact. And it’s unlikely many of the big assumptions underpinning that budget’s optimistic projections will play out.
"The economy is coming back. Australia is coming back," Treasurer Josh Frydenberg said.
Spending on the nation's most vulnerable
The bulk of new government spending goes to the nation's most vulnerable — children, the elderly and people with a disability — all sectors the government has faced criticism for failing to do enough to support.
The centrepiece of the budget is $17.7 billion for the aged care sector, announced along with the government's response to the Aged Care Royal Commission, which unearthed years of neglect and abuse.
The government hopes the backlog of people wanting home care packages will be cleared with an extra 80,000 additional packages created within two years.
Aged care residents will also have to receive 3 hours 20 minutes of care each day by 2023.
What's in the budget? Here are the key measures we already know about
The federal budget will have measures for retirees, single parents, and first home buyers. What about you?Pre-budget leaks are a well-established tradition, and this year has been no exception.
There's money for training aged care workers and incentives to encourage people to stay in the industry.
That pitch to drive jobs extends to the childcare sector, which will receive an extra $1.7 billion over the next three years.
The Coalition will match Labor's pledge to abolish an income cap.
It will also offer additional subsidies for families with two or more children if they are in care at the same time.
The Government estimates it will help around 250,000 families, on average, around $2,200.
That childcare spend is central in the Government's first women's budget statement, and accounts for half of its $3.4 billion pledge to improve women's safety, economic security and health and wellbeing.
The Coalition hopes its policies for women will help counter criticism it has faced in recent months for failing to address women's inequality.
The government hopes that helping with childcare expenses will encourage more women into work, which could boost their spending in the short term, while ensuring they have better superannuation balances when they retire.
Billions flow in big-spending budget but businesses fear prolonged border closures
Tens of billions of dollars will flow in a big-spending federal budget but there are fears the government's efforts to stimulate jobs growth could be held back if the international border isn't opened this year.The bulk of new government spending goes to the nation's most vulnerable — children, the elderly and people with a disability — all sectors the government has faced criticism for failing to do enough to support.
The budget also includes $2.3 billion for mental health support and treatment.
Business programs extended
The government has picked out successes that targeted businesses in the last budget and is extending them.
Business tax incentives will be extended, while the JobTrainer program will receive another $500 million, subject to states and territories matching that funding.
It will also offer another boost to its apprentice support scheme.
The underperforming JobMaker Hiring Credit, a youth wage subsidy announced in last year's budget, will stay in place but is only expected to generate up to 10,000 jobs over the next two years, having initially forecasted it would produce 450,000 jobs.
Tax cuts for low-middle income earners
There had been calls for the government to bring forward the controversial, but legislated, third stage of its income tax cuts, which is due to come into effect 2024-25.
The Coalition has resisted that but has extended a tax offset for low- and middle-income earners for another year, costing the government almost $8 billion.
Budget 2021 backs jobs, mental health and farmers in Queensland but misses support for social housing and tourism
Farmers, mental health and support for jobs are the winners for regional Queenslanders in the budget, but the housing crisis has largely been ignored, say advocacy groups.But like so many others facing the regional rental crisis, the budget has provided no new hope for the central Queensland family-of-seven's need for long-term accommodation.
"This is a stimulus measure because we're not out of the pandemic yet," Mr Frydenberg said.
Money for onshore vaccine manufacturing
Finance Minister Simon Birmingham confirmed the government was working on plans to manufacture mRNA vaccines in Australia.
Australia's lack of an mRNA laboratory has been highlighted in the pandemic with the nation unable to manufacture the Pfizer COVID-19 vaccine.
That was further exacerbated when the government changed its advice for vaccinations, with anyone under 50 being recommended to receive the Pfizer vaccine because of fears of rare blood clots linked to the AstraZeneca vaccine, which Australia can produce onshore.
But the government has refused to detail the cost, insisting it was funded in the budget but the price withheld as officials continued to negotiate with the private sector.
Without an mRNA lab, Australia will have to continue to import Pfizer vaccines, and the likely booster shots people will have to receive in future years.
"We see this as being important for the long term," Senator Birmingham said.
The broader budget includes an extra $1.9 billion for the vaccine rollout.
The budget also includes $3.8 billion in measures the government has funded but not yet announced publicly what they are.
Who led Josh Frydenberg down the path of empathy and rigour in fiscal policy?
Treasury boss Steven Kennedy — a trained nurse who holds a PhD in economics — has helped usher in a budget prioritising jobs and economic growth not debt and deficit.They are the ones grinding policy proposals through economic models to determine what it all means for GDP growth, the unemployment rate, and the budget bottom line — and writing cameos in the budget papers about what tax policy means for Priya who “is a civil engineer working in regional Australia” earning $80,000 a year.
Economic recovery quicker than expected
The budget position has improved vastly in the past six months thanks to a quicker-than-expected economic recovery from Australia's first recession in three decades.
The recovery has also been aided by soaring iron ore prices, a major Australian export to China, which are currently more than four times the value Treasury forecasted in the last budget.
The deficit this financial year is expected to be $161 billion, falling to $106 billion in 2021-22.
At the peak of the pandemic, Treasury feared unemployment would reach 15 per cent. It's currently 5.6 per cent and the government expects it will fall below 5 per cent by the end of 2022.
The government has forecasted an unemployment rate of 4.5 per cent in 2023-24 and 2024-25, which it hopes will drive wage growth up more than 2 per cent year.
Debt set to hit $1 trillion
Forecasted debt and deficits are likely to cause unease in parts of the Coalition but the Treasurer has made it clear the focus won't shift to cutting government spending until unemployment is at least below 5 per cent.
"We are in the middle of a pandemic. This is a pandemic budget," he told the ABC.
The Coalition, still aware of the electoral punishment it felt from its contentious cost-cutting 2014 budget, hopes driving jobs growth will help tackle budget repair.
The Treasurer hopes fewer unemployed people will both boost government coffers from higher income tax takings, while also reducing the need for welfare payments.
The budget is underpinned by a series of assumptions, including that the bulk of the population will be vaccinated by the end of the year and that international borders will remain closed until the middle of 2022.
Federal budget under fire on Q+A as Jim Chalmers talks slush funds and Jacqui Lambie takes aim over national debt
Shadow Treasurer Jim Chalmers accuses the government of using slush funds in the budget as independent senator Jacqui Lambie calls out the government for leaving future generations with a trillion dollars worth of debt.On Thursday night, Minister for Superannuation, Financial Services and Digital Economy Jane Hume was left to fend off criticisms of the government, which came especially vigorously from Independent Senator Jacqui Lambie and Shadow Treasurer Jim Chalmers.
"While the outlook is positive, considerable risks remain," the budget warns.
"The continued economic recovery will rely on the effective containment of COVID-19 outbreaks both here and abroad and will be a key factor in the timing of the reopening of international borders, which could weigh on the outlook for the tourism and education sectors.
"Internationally, ongoing global trade tensions and the potential for further trade actions continue to pose risks to the outlook for Australian exports.
"More broadly, downside risks to the outlook for the global economy from ongoing outbreaks of the virus in major economies, including India, could have implications for Australia’s domestic economy."
Re-opening Australia's international border
Senator Birmingham told the ABC he expected the border would be gradually opened, with a "small number of students" coming to Australia later this year.
The closure of the international border has the budget forecasting declines in net migration, which has been integral to growing Australia's economy and preventing falling into a recession prior to the pandemic, this financial year and again in 2021-22.
Pre-pandemic growth in migration to Australia is not tipped to happen until 2024-25.
"The weak outlook for population growth in the near term as a result of border closures will also weigh on the outlook for real GDP growth," the budget states.
On the current projections, the budget forecasts that real GDP, which offers an indication of the health of the economy, is tipped for 1.25 per cent growth this financial year, after a 0.2 per cent decline in 2019-20.
Real GDP growth is then tipped to rise a further 4.25 per cent in 2021-22, before falling back to 2 per cent in each of the following three financial years.
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Video: Government announces $7.8b in further tax cuts for low and middle-income earners (Sky News Australia)
Victoria's post-pandemic recovery 'on track' but budget deficit forecast to be $11.6 billion .
A better-than-expected deficit of $11.6 billion is forecast for next year in the Victorian budget as the state economy bounces back after last year's lockdown.The final deficit for the COVID-hit 2020–21 budget is nearly $6 billion less than forecast at $17.4 billion.