The Treasurer handed down his second ‘pandemic Budget’ to wide acclaim yesterday evening. "The Budget is coming back" was his refrain in the Parliament.
Master Builders Australia is firmly of the view that the Treasurer has done the right thing in standing firm and resisting the temptation to withdraw public sector support for the economy too soon. To do so would put at risk the economic recovery so far.
The Budget has the potential to navigate the transition from a Budget on life support to one that is growing strongly led by the private sector.
Widely hailed as an ‘election Budget’, it will pump $53 billion of new stimulus payments and key services commitments into the economy.
- Infrastructure: commitments of $15.2bn over 10 years for road, rail and community infrastructure projects.
- Tax Cuts: temporary full expensing will be extended to 20 June 2023. Temporary loss carry-back is also being extended to include the 2022-23 income year. This will deliver an extra $20.7 billion in tax relief to businesses.
- Simpler handling of tax disputes: For businesses with tax debts, it will be simpler and faster to pause or modify ATO debt recovery actions. The Administrative Appeals Tribunal is empowered to pause or modify such actions including an avenue to ensure payments are not required until the matter is settled by the new umpire.
- Skills and training: the JobTrainer program will be extended for another 12 months. It is expected to deliver around 163,000 additional low fee and free training places in areas of skills need.
- Apprentice and trainee subsidy: the Boosting Apprentice Commencements (BAC) subsidy has been further extended for 6 months for new apprentices or trainees commencing before 31 March 2022. The subsidy remains capped at $7,000 per quarter per apprentice or trainee. The Budget also delivers pathway services for 5,000 women to commence non-traditional apprenticeships.
- Housing: The Budget provides more support for people buying homes, with packages for single parents and first home buyers.
- Mental Health: A $2.3 billion commitment to mental health care and suicide prevention, a new National Suicide Prevention Office and a further $1.1 billion investment in women’s safety
- Superannuation: Removal of the $450 per month minimum income threshold for superannuation guarantee, older Australians no longer need to meet a work test for making voluntary super contributions, those aged over 60 allowed to contribute up to $300,000 extra to super funds if they downsize.
- Employment and Unemployment: Employment is expected to increase strongly by 6½ per cent in 2020-21, and continue to increase steadily by 1 per cent in both 2021-22 and 2022-23.
The unemployment rate is forecast to fall to 5½ per cent by the June quarter of 2021 and to continue to decline over the forecast period, with rapid falls in the near term expected to moderate as the economic recovery stabilises. The Budget Papers forecast, “Continued policy support and increasing momentum in the economy will see the unemployment rate return to its re-pandemic level in the December quarter of 2021. Beyond this, in line with continued growth in employment, the unemployment rate is expected to decline steadily, to reach 5 per cent in the June quarter of 2022, before falling further to 4¾ per cent in the June quarter of 2023.”
Wages: The Budget Papers say that “Overall, the outlook for wage growth is expected to remain moderate over the forecast period. This reflects both the severe impacts of the pandemic and the continued spare capacity in the labour market in the near term. The wage growth outlook also reflects a modest downwards revision to Treasury’s estimate of the NAIRU.”
The Wage Price Index (wages) is forecast to grow by 1¼ per cent through the year to the June quarter of 2021 and by 1½ per cent through the year to the June quarter of 2022, before rising to 2¼ per cent through the year to the June quarter of 2023. “The near-term outlook is consistent with low wage increases in new federal enterprise bargaining agreements and state public sector wage caps that are expected to moderate the outlook for wage growth over the forecast period. Towards the end of the forecast period, the lower unemployment rate and broader economic strength should see wages begin to pick up.”
Focus on NSW
- Hunter region: the Budget will upgrade Newcastle Airport runway to international standards, with added capacity to take long-range aircraft. This will generate substantial new economic activity, with forecast creation of 4,400 jobs and a total injection of $12.7 billion into the regional economy over 20 years.
- Major road upgrades: More than $2 billion allocated to upgrading Great Western Highway between Lithgow and Katoomba. $500 million for Princes Highway Corridor upgrades and direct funding of improvements to the M5 East at Moorebank is directly aimed at congestion busting. Upgrades to the Picton Road at the Mount Ousley Interchange.
- GST: NSW’s share of the GST pool will be $21.9 billion, up from $17.5 billion in last year’s Budget. The faster-than-expected recovery has boosted the GST pool, supplemented by extra allowances from the Commonwealth of $600 million per year until 2024-25.
As the Australian Financial Review’s Political Editor put it, “if this is not an election Budget then it is a dress rehearsal.”
He says that “Government receipts were up by $104 billion from the December estimates. The Budget spends $96 billion of it.”
Politically, the consensus of commentators is that Morrison Government has made life exceptionally difficult for Labor with this Budget.
Firstly, there are no real losers from the Budget. Certainly, there are bigger winners but no real losers. Take the measure to give single mums access to home ownership with the deposit as low as 2%. Some women’s advocates mention that it will support women with some income but no one claim that it’s not an authentically good policy or that it’s somehow going to benefit the Real House Wives Of Melbourne.
Secondly, it eats into Labor’s constituency with big investments in skills among other things.
Thirdly, There is also the issue of timing. The impact of measures like HomeBuilder will run out as will the stimulus impact of other measures. The Government says the GDP will rise to around 5% over the next year but it is unlikely to remain at that level.
However, a good Budget doesn’t lock in an election and there are many, many factors at play. What is certain is that the Government will be in a frenzy of private polling over the next few weeks to analysis the electorate’s response within an inch of its life. If the response is very good over a reasonably sustained period, then like it or not a November election will become harder for some inside the Government, to resist.
Read the full Master Builders Australia’s Special Budget Update outlining the key initiatives in the Federal Budget below.