Treasurer reveals how budget promises will be paid for

Treasurer Josh Frydenberg has revealed how he will pay for billions of dollars worth of promises in the federal budget.

Australia’s unemployment rate will dip to its lowest rate in almost half a century within months, vastly improving the budget bottom line and helping bankroll the Morrison government’s election campaign.

Tuesday’s budget will show the unemployment rate will drop to 3.75 per cent by the end of September for the first time since 1974, well down from the forecast 7 per cent rate predicted by the Treasury at the height of the Covid-19 pandemic.

Job-creating projects, including those outlined in the $17.9bn infrastructure pipeline announced on Monday, will be instrumental in balancing out the multi-billion dollar spend on defence, and any cost-of-living relief measures such as the reduction of the fuel excise and cash handouts.

It’s expected at least three quarters of the budget’s revenue upgrades will be associated with a stronger labour market and more people in work.

Treasurer Josh Frydenberg says the budget bottom line will be vastly improved by Australia’s unemployment rate falling to its lowest since 1974. Picture: NCA NewsWire / Gary Ramage

With 701,000 fewer people on welfare and 1.2 million more people in work than at the height of the pandemic, Treasurer Josh Frydenberg will say this will result in a substantial improvement in the budget bottom line.

“With more people in work and less people on welfare, the budget bottom line is improving after providing unprecedented economic support to Australians,” he will say.

“But there is more to do … now is not the time to risk the gains we have made.”

Mr Frydenberg said the projected 3.75 per cent unemployment rate, expected to be reached in the September quarter, will not only be the lowest rate in half a century, but is also three whole percentage points below the October 2020 budget forecast.

There are now more than 600,000 more Australians employed than what was expected at the time of the October 2020-21 budget.

Mr Frydenberg will unveil his budget on Tuesday night. Picture: NCA NewsWire / Gary Ramage

“This hasn’t been luck. It has been the result of a clear fiscal strategy to save jobs and drive the unemployment rate to historically low levels, which today at four per cent, is at its equal lowest level in 48 years,” he will say.

As part of a major jobs pipeline to be unveiled in Tuesday’s budget, a $49.5m incentive will be announced to get people in, and stay in, aged care.

In the next step of aged care funding in the wake of the Royal Commission, Mr Frydenberg will announce an additional 15,000 subsidised vocational education and training places for those working in or looking to enter the aged care workforce.

“We’re providing more opportunity for people to enter the aged care workforce as part of our plan for a stronger future,” Mr Frydenberg will say.

The announcement builds on the $17.7bn invested in aged care in last year’s budget, and is likely to be accompanied by other major aged care announcements on Tuesday.