Business, jobs fuelling recovery

Josh Frydenberg has pushed back the task of serious budget repair beyond Tuesday for good reason, preferring to concentrate on creating the conditions for wider economic recovery. Repairing the budget through business and jobs growth is the priority, as it needs to be. “We won’t be undertaking any sharp pivots towards austerity,” the Treasurer said a few days ago. “We want more people in jobs, and in better-paying jobs. This is what our fiscal strategy is designed to achieve.” It is working well.

The rebound will see the nation’s $32bn COVID welfare bill halved during the next four years and the number of JobSeeker recipients return to pre-pandemic levels, Finance Minister Simon Birmingham told The Australian on Wednesday. In a sign of strong confidence, the recovery has sparked a fresh wave of entrepreneurship. New company registrations so far this calendar year are running at more than 25 per cent above average compared with the past seven years. The strategy to encourage business growth also is helping the budget. If Deloitte Access Economics estimates are correct, the budget will show a $100bn boost to the bottom line across the forward estimates. As Patrick Commins reports on Friday, booming iron ore exports produced a windfall corporate tax take during the March quarter. Despite the pandemic, federal revenue was higher than a year earlier — leaving the deficit $30bn better than projections in the Mid-Year Economic and Fiscal Outlook in December.

Mr Frydenberg is right when he says this is no time for austerity. But neither is it ever time for gung-ho spending. Even when economic stimulus is needed, restraint in handing out taxpayers’ money is a cornerstone of good government, keeping taxes down and fostering prosperity. As Judith Sloan wrote on Thursday, many Coalition supporters prefer frugality over waste. Even Anthony Albanese has picked up the theme, pledging to be a cautious spender if Labor wins office. It is essential that the government retain the capacity to weather another crisis if the need arose. In light of the ongoing pandemic — more than 800,000 new infections were diagnosed across the world on Wednesday and 14,000 people died — this cannot be ruled out. Australia is better placed than most of the world. But the return of masks and restrictions in NSW in response to a mini outbreak shows how unpredictable COVID-19 can be. We welcome Senator Birmingham’s decision to save by not drawing down on assets of the Future Fund, which have surged to $179bn. Under legislation, the government could have accessed the fund from July 1 last year. But, like his predecessor in the finance portfolio, Mathias Cormann, Senator Birmingham has opted to allow the fund “a longer period for growth”. This is prudent.

On the spending side of the budget, ongoing investment in road and rail development also should foster business development and limit capacity constraints. As Commins wrote on Thursday, the nation is in the midst of a historic infrastructure spending boom, with investment expected to reach $250bn next year — the equivalent of building five National Broadband Networks. The government’s commitment to a substantial upgrade of aged care also should limit its scope for profligate spending across the board. The budget will include its main response to the Royal Commission into Aged Care Quality and Safety’s 148 recommendations. The commission’s report, handed to the government in February, found that 39.2 per cent of Australians living in nursing homes were experiencing some form of physical abuse, emotional abuse or neglect. That shameful situation must be addressed, an endeavour that will require extra resources and staff. The expansion of aged-care packages to cater for increasing numbers of older Australians who understandably wish to remain in their own homes for longer also must continue.

Judging by the figures provided by the Parliamentary Budget Office, Mr Frydenberg is in a position to deliver an expansionary budget, as promised, but also with a better bottom line than expected. Net debt was $587.5bn at the end of March, which was $23.6bn less than at the end of last year. But it was also $157.8bn (37 per cent) higher than a year earlier, when COVID-19 restrictions were implemented. While we are far from in a black hole, we’re also far from in the black. When appropriate, the budget will need to be returned to balance and debt repaid. In the interim, however, stimulating the economy in a way that encourages entrepreneurship, business expansion, private investment and jobs is positioning the economy for future growth.