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 is not opened this year.
- The budget forecasts the international border will not open until the middle of 2022
- It forecasts a decade of deficits and debt that is set to peak around $1 trillion in 2025
- Business groups want the international border to open to help businesses recover from the pandemic
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 Treasurer has dubbed it a budget that showed the Australian economy was “soaring back to life” after going into a coronavirus-induced recession last year.
“The economy is coming back. Australia is coming back,” he said.
But Labor’s Shadow Treasurer Jim Chalmers said the budget would deliver little despite the tens of billions it was spending.
“This budget is just all about more marketing, mismanagement and missed opportunities,” he said.
International border unlikely to open this year
The budget forecast that international borders would not open until the middle of next year.
But the government insists any decision on the border would be based on health advice.
Finance Minister Simon Birmingham said it would be a phased opening of the border, with some international students likely to come as early as this year.
A 2022 border opening, if achieved, would come months after when the government expects to have most Australians vaccinated.
Business groups were quick to celebrate tax breaks and incentives they will receive from the budget.
But many fear a delayed border opening would dampen the recovery from Australia’s first recession in almost three decades.
“What we’re hearing from business loud and clear is they need border open sooner rather than later,” said Innes Willox from the AI Group.
“It’s impacting them in a range of ways, they’re finding difficulty getting staff into the country, they’re having people get in to repair and replace equipment, they’re just finding it difficult to move around.
“We’re a little bit in a gilded cage at the moment here, the quicker we can get out of that and be interacting with the global community, the better.”
That sentiment was echoed by Jenny Lambert from the Australian Chamber of Commerce and Industry.
“The community seems to be coming to expect that we can continue to grow economically, even though we’re in a closed shop at the moment. That can’t continue. We are living in an artificial economic environment,” she said.
Tourism and Transport Forum chief executive Margy Osmond said the international border closure would lead to more job losses and business failures.
“This is a budget that leaves the tourism industry high and dry with nowhere to go,” she said.
“Leaving the borders unopen, with no timetable, condemns us virtually to being the lost kingdom of the South Pacific, when the rest of the world is opening up.”
“We will see more job losses and we will see many, many business failures out of this and when the borders do finally open, in the absence of any additional ongoing support we’ll be lucky to have a tourism industry to welcome international tourists back into the country.”
Criticism government hasn’t done enough for women
The budget materials included a book dubbed the “Women’s Budget Statement” and came after sustained criticism about the government’s treatment and policies for women.
Four of the five glossy brochures that came with the budget documents featured women in health, mechanical, retail and caregiving settings.
The budget papers trumpet more than $3 billion specifically targeted for women but half of that was the $1.7 billion for the childcare sector.
One of the key issues affecting women’s super balances is time spent out of the workforce caring for children, but the government decided not to pay super on Commonwealth paid parental leave — as recommended by the review into retirement incomes chaired by former Treasury official Mike Callaghan.
The Industry Super Australia chief executive Bernie Dean described it as a post-Mother’s Day sting, saying if the government was serious about closing the gender super gap they would ensure super was paid on every dollar earned, including parental leave.
“The best way to improve women’s economic security is to stop talking about it as a problem and get rid of outdated policies by paying super on every dollar they earn and mandating that it be paid on payday,” Mr Dean said.
“The government is sending the message to mums that it is OK for their savings to suffer when they take time out of the paid workforce to raise children.”
Chief Executive Women’s Sam Mostyn welcomed the government’s decision to axe the $450-a-month threshold to pay compulsory super.
But she was also critical of the decision not to extend super to parental leave.
“We know that the lack of superannuation accounts held by women across this country is almost scandalous, and that too many of our women who have worked throughout their lives that met cliffs in their period of work when they’ve taken time off for childcare, eldercare and the like, miss out on a smoothing of their superannuation account and end up relatively poor into their older age.”
Economy recovering from coronavirus faster 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 deficit this financial year is expected to be $161 billion, falling to $106 billion in 2021-22.
Labor has attacked the government’s forecast of a decade of deficits, with net debt set to hit almost $1 trillion in 2025.
“There’s no sense of a plan about how the government will get that back under control,” Mr Chalmers said.
At the peak of the pandemic, Treasury feared unemployment would reach 15 per cent. It is 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 per year.
The government has extended a tax offset for low-and middle-income earners for another year, costing the government almost $8 billion.
“This is a stimulus measure because we’re not out of the pandemic yet,” Mr Frydenberg said.
But it resisted calls to bring forward the already legislated but contentious stage three tax cuts, which mostly benefit high-income earners.
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Aged care funding central to government budget spending
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 three hours and 20 minutes of care each day by 2023.
There is money for training aged care workers and incentives to encourage people to stay in the industry.
The sector has broadly welcomed the package, with Ian Yates from the Council on the Ageing saying he believed the additional 80,000 packages would clear the waiting list by the end of next year, or the middle of 2023 by the latest.
Despite the positive response, questions have been raised about whether the sector has the workers needed to implement the significant changes announced.
Mr Yates said the workforce would be the “major challenge” in the path to reform, saying further incentives were needed to be introduced to attract more staff.
“There certainly is an issue with the borders closed and they are going to have to make working in aged care more attractive,” he said.
“We think that the government ought to support the Health Services Union application to the Fair Work Commission for increased wages.”
National Seniors Australia chief advocate Ian Henschke described the funding as a good first step, but said more home care packages were needed.
“The government can’t walk away saying they’ve restored faith in the aged care system, they’ve gone a long way to restoring some faith in the aged care system, but this has to be an ongoing commitment by government,” he said.
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