Shortcuts / 13 May 2021

The 2021 Federal Budget

The COVID-19 pandemic has blown up the country’s finances. And let’s face it – fiscal strategies and the price of iron ore aren’t everyone’s cup of tea… We promise we won’t go there, but we will give you a look at why Budgets matter, the big items in this Budget, and the policy and political issues at play.

Where do we start?
How about why the Budget is important? 

I assume they are because you’ve been banging on about it for days…
We have, and they are. The Federal Budget is the national government of the day’s chance to set out its policy priorities each year. When governments make promises the Budget sets out how they will pay for them. It also forecasts the state of the economy over what they call the forward estimates.

What the what?
‘Forward estimates’ is just fancy talk for the coming 4 years.

And what’s all this talk about debt and deficit? What’s the difference?
Debt is total money owed and deficit is when spending exceeds revenue in a given period, like a financial year. 

And we’ve got a surplus of both?
We like what you did there… We have, and that’s because the government’s actions to keep the economy ticking during the pandemic – like the $90 billion JobKeeper wage subsidy – have seen the total level of Commonwealth debt skyrocket to unprecedented highs. It’s forecast to hit $980 billion in the 2025 financial year – almost 5 times the level seen during the height of the Global Financial Crisis in the late noughties.

But hasn’t that spending put Australia’s economy in a good position?
Yup, and the recovery in the Australian economy over the last few months has been described as miraculous.

But that doesn’t mean all is well…
Right on. And what the government has done in this year’s Budget is give Australia an economic plan and set out policies that it says will protect Aussies from COVID, create more jobs and guarantee essential services.

Let’s start at the top?
Yep – COVID. There’s $3.4 billion more for the vaccine rollout, and for COVID-related health services, including for testing and tracing of cases. That takes the Federal Government’s commitment to things directly related to COVID to $20 billion.  

What about jobs?
Treasurer Josh Frydenberg says we’re in the incredible position of having more jobs now than just before the pandemic hit. But he also says it isn’t enough. And that’s why jobs were mentioned by him 26 times in his speech on Tuesday night….

So how do we get more jobs?
The Budget provides billions of dollars for job-creating programs and measures to improve productivity. It’s a good thing to do because having more people in work creating goods and services that people consume will help get that wheel of economic growth turning. 

You mentioned supporting services?
There were big expectations for spending on aged care after the Royal Commission delivered its final report earlier this year which showed shocking cases of neglect and big funding gaps. So, $17.7 billion is headed that way…

Any other notables?
Just because you asked… The Treasurer announced an additional $2.3 billion commitment to mental health care and suicide prevention – the single biggest investment on record. And, a further $13.2 billion over 4 years to meet the needs of Australians with disability through the National Disability Insurance Scheme (NDIS). There’s also new funding for women’s safety programs including $1.1 billion more for emergency accommodation, legal assistance, counselling and financial support. 

That’s a lot of numbers…
And a lot of opinions around those numbers… What many are saying is this Coalition Budget reflects the kind of Budget you’d be more likely to see from a Labor government…  

What does that mean?
Budgets put together by the Liberal and National parties during times of high deficit and debt traditionally rein in spending and cut things right back. But in these COVID times their position is that the best way to rev up the economy is to spend on things that will support growth – like training that will lead to more jobs. Even spending on things like mental health has a focus on making Australians more productive.

Sounds like there are some big assumptions for the numbers to stack up…
Yup. Including getting unemployment down to 4.5% by 2023-24 to push wages up and get people spending more. And it’s assumed we’ll see 4.25% economic growth next financial year – that’s a rate we haven’t seen since the late 90s. 

And what about the virus?
It is assumed that all Australians who want to be vaccinated against the coronavirus will have gone through that process by the end of this year. And that our national border won’t be fully open until mid next year.

This wouldn’t have anything to do with a looming election, would it?
Well, commentators have said a lot about how all that spending makes it feel like a pre-election Budget…

What does the Opposition think of all that?
Labor leader Anthony Albanese has said a couple of things. First is that the big job the government has this year is to sort out the vaccination rollout and hotel quarantine, and he says there’s not enough focus on that. He also says there’s not enough structural reform to see wages increase, stuff like that. He’ll have more to say in his Budget reply tonight… 

Squiz recommends:

ABC – Treasurer Josh Frydenberg’s Federal Budget 2021-22 speech

Annabel Crabb – Does the Federal Budget deliver for women?

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