Labor Federal Budget 2022: Our experts deliver their budget verdicts
We reveal how the budget will affect tax, housing, aged care, health, education and the economy.
BUDGET VERDICT
Dennis Shanahan, National Editor
This is a ‘live now, pay later’ budget. For all the grim forecasts of higher inflation, slower growth, job losses, more debt and deficit, interest rate rises, slow wages growth and all the claims of Coalition “rorts and waste” there are no real spending cuts and there is no medium-term plan to deal with the dire economic outlook.
There is a proper allocation of one-off commodity gains to deficit reduction but Labor is spending as much on infrastructure as Scott Morrison proposed, just on Labor priorities. And, those priorities include $2bn for the Melbourne Metropolitan rail link which is not even on Anthony Albanese’s much-vaunted Infrastructure Australia priority list.
There is more spending on child care, aged care, public medicines and health and describing them as “cheaper” child care, medicines and energy does not reduce the burden on the taxpayers or the budget bottom line.
The short-term cut in the deficit is a one-off and new revenue from a tax crackdown and multinationals’ tax is gobbled up by spending. Labor chose to have an early budget to clear the ledger of election promises, start to address the structural economic problems in the 2023 budget and play the ‘long game’ through to the 2025 election. But the lack of any real reforms in this budget increases the pressure on the need for hard decisions next year and creates the risk of Labor of being forever one budget behind rather than one ahead.
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STATE-OF-THE-ECONOMY
Patrick Commins, Economics Correspondent
Jim Chalmers can’t say it enough, and it’s true: the Albanese government has inherited a devilish combination of a grim economicoutlook and intensifying spending pressures that threaten to entrench a $50bn structural deficit stretching into the never-never.
The big improvements in the bottom line in this financial year and the next begin to get whittled away in the back half ofthe four-year forward estimates, before the monster that is the NDIS begins to devour any hope of balanced budgets. The Treasurer is only too aware of the challenges. But laying out the problem is a world away from solving them. And as the Treasury analysis shows: even small changes to forecasts around inflation and global growth could see the country tilting dangerously towards recession in 2023-24, without the fiscal buffers to help households through.
There’s a $53.6bn improvement in the bottom line in this and the next financial year, before a $10.8bn deterioration in the following two years.
The economy will grow by 1.5 per cent in 2023-24, but that would be halved if inflation peaks at 8.75 per cent rather than 7.75 per cent by December, or if there are big recessions in countries such as the US and UK.
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COST OF LIVING
Greg Brown, National Correspondent
Australians struggling with cost-of-living pressures have been given little relief in the budget, but it was the only course Jim Chalmers could take in his aim to keep inflation under control.
There were no cash handouts or tax offsets for working families, with the Treasurer restraining from sugar hits that would have undermined the Reserve Bank’s inflation strategy and been ultimately self-defeating.
But the government’s “five-point plan for cost-of-living relief” provides no help for families when inflation peaks at 7.75 per cent later this year, with Dr Chalmers saying “getting wages going again” and cheaper housing is part of the package.
The political problem with that strategy is the government does not expect real wage growth until 2024 while it will take five years to build 30,000 social and affordable homes.
Extra childcare subsidies will not be available until mid next year while the paid parental leave extension is not fully implemented until 2026.
Dr Chalmers may have pulled the right economic lever with staged cost-of-living relief but expect the Coalition to score political points by highlighting the budget’s lack of immediate support.
MAIN POINTS
• No immediate relief through tax handouts or tax offsets.
• The $7.5bn cost-of-living package will offer staged relief mostly through pre-election promises including more subsidies for medicines and childcare.
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WAGES VERDICT
Ewin Hannan, Workplace Editor
Workers face another two years of real wage cuts as treasury forecasts pay rises will lag behind the inflation rate until2024. After years of stagnating wages under the Coalition, the higher than anticipated inflation rate is bringing pain tothe kitchen tables of working families making it harder for Labor to meet its pledge to get wages moving again.
If Treasury is correct, and that’s no given, wages will next year be growing at their fastest pace since 2012, with real wages rising in 2024 for the first time in three years. But many things, including events outside of the government’s control, have to go right. In the meantime, Labor will implement a series of cost of living measures and hope its workplace policy changes will be a vehicle for further wages growth.
MAIN POINTS
• Wage growth forecast to be stronger than expected, rising by 3.75 per cent over this financial year and again in 2023–24.
• Real wages are forecast to rise in 2023–24 for the first time since early 2021.
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BUSINESS VERDICT
Eric Johnston, Associate Editor
For all the talk of tough times ahead, the first Chalmers budget shirks the challenge of reform and locks in big deficits and higher debt as far as can be seen. Business has long stopped waiting for Canberra to come up with solutions to economic pressures and this budget has given little to change this thinking.
The budget is big on crackdowns with multi-nationals targeted to pay nearly $1bn more in taxes, while enforcement agencies including ACCC have been given the power to hit business with higher fines. Super is largely untouched and spending on rewiring the power grid for the energy transition is ambitious.
Australia is forecast to avoid a recession but growth is set to stall from 3.25 per cent this year to just 1.5 per cent next year. Inflation is set to peak at 7.75 per cent later this financial year. Chalmers isn’t going to scare the bond markets but has narrowed his options if the global economic storm is bigger than expected.
MAIN POINTS
• $20bn fund to provide cheap loans to rewire energy grid for renewables
• $15bn clean energy and high tech industrial fund.
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SKILLS/TRAINING VERDICT
Ewin Hannan, Workplace Editor
Labor’s new apprenticeship funding aims to increase apprentice completion rates by offering financial incentives to young workers to stick at their trade. The skills initiatives announced in the budget build on Labor’s pre-election commitments and agreements reached at the Jobs and Skills Summit.
While Anthony Albanese promised $100 million to fund 10,000 apprentices, the budget commits an initial $62 million to building a “clean energy” workforce. The same amount has been allocated to givepensioners the opportunity to work and earn extra money. The amount they can earn this financial year will rise from $7800 to $11800 before their pension is reduced.
The right of pensioners to earn extra income has been a hot button topic on talkback radio. It will be interesting to see if the pensioners take up the opportunity.
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ENERGY/CLIMATE VERDICT
Perry Williams, Senior Business Writer
Anthony Albanese’s pledge for a $275 cut to the average household electricity bill by 2025 looks dead in the water. The pre-election promise was contained in Labor’s Powering Australia plan, predicting an 18 per cent price cut in three years time and a more ambitious $378 fall by 2030. Crucially, the goal was set well before Russia’s war with Ukraine roiled global commodity markets. The reality now is an energy shock set to persist right through until 2024, and possibly beyond, with power prices set to soar 30 per cent in 2023-24, according to Treasury forecasts.
Energy Minister Chris Bowen is correct to argue that firmed renewables, backed up by storage, will be the cheapest form of electricity for the national grid over the medium and long-term. But Moscow’s conflict - inflating international coal and gas prices - combined with Australia’s own bumpy transition to clean energy, will result in bill shock for consumers.
Labor must now hold its nerve and push through with an ambitious renewable, storage and transmission spend this decade as it scrambles to replace coal. But the Prime Minister must also balance that ambition with common sense policies to ensure the nation avoids a repeat of this winter’s energy crisis - all the while limiting any further pressure on already stretched household budgets.
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HOUSING VERDICT
John Ferguson, Associate Editor
It is a government announcement where the private sector gets to do most of the work. This is a good thing. The downside is that the so-called national housing accord is really just a commonsense attempt to provide a government response to a hard core political problem.
The lesson on the ground in the big cities is that housing has become so expensive it is changing the way young voters think about their lives and their future prospects. Unless governments address this issue, the mainstream parties will risk the flight of voters in the younger demographics to left-leaning candidates. This is a big reason why the Greens and the teals are looking to be in the ascendancy. This is not what Anthony Albanese wants.
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CHILDCARE/EDUCATION VERDICT
Natasha Bita, Education Editor
Cheaper childcare will put money in the pockets of 1.3 million families – but not for long. The clunky childcare system is a financial revolving door, as commercial operators raise their fees to ensure a profit, and taxpayers pour more money into subsidies for families.
The Australian Competition and Consumer Commission (ACCC) will have to work out a way to stop costs spiralling. The solution must include direct wage top-ups for childcare workers on the minimum wage, who are quitting the sector in droves. Stretching paid parental leave to six months on the minimum wage will ensure working parents have more time to bond with their babies – but it’s disappointing they’ll have to wait four years for the full benefit.
A new Office of Youth will give teenagers a vital voice in reforming Australia’s struggling schooling system.
MAIN POINTS
• Higher childcare subsidies for 1.3 million families.
• An extra 6 weeks’ Paid Parental Leave, to total six months by 2026.
• Office of Youth.
• $271 million over four years to upgrade school infrastructure.
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YOUTH VERDICT
Ellie Dudley, Reporter, The Oz
This Budget was created to impress young Australians, boasting incredible promises for universities, housing and policy - but concrete plans to bring them to fruition are nowhere to be seen.
Disadvantaged youth have been guaranteed better access to higher education, with thousands of places opened up to less privileged students, and a half a million fee-free TAFE places on offer - but 300,000 of those only from 2024, and only if the states and territories are happy to “work together” to achieve it.
One million new homes have been promised over the next five years, to allow more Australians to enter the housing market, but that’s an “ambition” and an “aspiration” - not a commitment.
Regional first home buyers are also winners, at least at first glance, permitted to buy a new or existing home with only a 5 per cent deposit.
And an inaugural ‘Office for Youth’ will allow young Australians to weigh in on programs that affect them.
But while the promises are big the roadmap to achieve them is unclear.
And, as the generation most impacted by Covid-induced government spending, news the budget deficit is still forecast to be $36.9bn by the end of the financial year will not be warmly received.
MAIN POINTS
• $485m dedicated to create 20,000 university places for disadvantaged students
• $1bn for 500,000 fee-free TAFE places
• 10% discount on up-front university fees scrapped
• One million new homes, with $350m dedicated to building the first 10,000 of them
• $10.5m for an ‘Office for Youth’
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REGIONS VERDICT
Charlie Peel, Reporter
A substantial boost to biosecurity funding will go a long way in appeasing farmers anxious about the incursion of livestock diseases. Importantly, it will bolster the confidence underpinning the country’s buoyant agriculture industry and regional communities.
Funding for regional industry-building logistics infrastructure, roads, timber industry and digital connectivity will be welcome. But some regional voters could feel rightly betrayed by the seemingly parochial axing of previously funded projects.
Wading in with extra funding to fix the fraught Murray Darling Basin Plan seems well-intended to ensure deadlines and targets are met, but the continued threat of water buybacks will raise hackles in regional communities.
MAIN POINTS
• $134.1m for biosecurity.
• Hells Gates Dam funding scrapped.
• More than $50m for Murray Darling Basin Plan delivery.
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NDIS VERDICT
Stephen Lunn, Social Affairs Editor
The NDIS will be a budget beast for the next decade. It is projected to grow by almost 14 per cent annually through to 2032-33. This is even faster than the most recent estimates of 11 per cent annual growth. Already the third largest government spending program, it will dwarf the costs of both Medicare and aged care by the end of the forward estimates in 2025-26, hitting almost $52 billion.
The government has committed to finding the money to fund the NDIS, and has made no move to tighten the current eligibility requirements. It has committed to a full review of the NDIS.
It is bolstering fraud detection with an additional $138m over four years to counter organised crime, and will ease the navigation of the byzantine system by putting $158m over four years to add 380 permanent staff to the National Disability Insurance Agency that administers the scheme.
MAIN POINTS
• NDIS costs projected to rise by an average 13.8 per cent over ten years, significantly higher than previous forecasts.
• NDIS costs will hit $52bn by 2025-26, dwarfing the costs of both Medicare ($35.8bn) and aged care ($34.7bn).
• $137.7m over four years to strengthen fraud detection.
• $158m over four years to bolster staffing at NDIA to help people with disability and their families navigate the system.
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INFRASTRUCTURE VERDICT
Greg Brown, National Correspondent
Anthony Albanese should be ready for an almighty counter-offensive from the Coalition after cancelling $2.8bn of the former government’s infrastructure commitments and delaying funding on a further $6.5bn of projects.
The government has shown poor transparency on budget day by not outlining each project which will be cancelled or delayed, with even departmental officials claiming they were not privy to that level of detail.
But as the full detail of the cuts and delays become apparent over the coming days there will be regional communities that find out they have lost out so Melbourne gets $2.2bn for the Suburban Rail Loop and Canberra receives funding for light rail.
This is on top of gutting the former government’s promised investments in dams, including cancelling the $5.4bn Hells Gates Dam and deferring funding for Dungowan Dam.
The government says it is still committed to projects it has deferred funding for but that won’t mean much to regional Coalition MPs who will be telling voters that Labor cut support for key infrastructure initiatives such as the Rockhampton Ring Road.
MAIN POINTS
• $2.8bn cut from Coalition’s infrastructure programs and $6.5bn of funding deferred past the budgeted forward estimates.
• Projects that will be cut or delayed include the $475m Monash rail project, the Rockhampton Ring Road and the Hells Gate Dam.
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WOMEN VERDICT
Natasha Bita, Education Editor
In a man’s world, it seems a woman’s work is never done. The Women’s Budget Statement shows than women generally earn less, and retire poorer, because they sacrifice paid careers to work for free caring for children and elderly parents.
The budget will start to even the playing field by forcing new dads to share in the care of newborns through Paid Parental Leave, setting a precedent for either parent to work flexibly to collect kids from school or take a week off work when a child is sick.
Banning secrecy clauses in salary contracts, and publishing the gender pay gaps in large companies, will help women negotiate equal pay for equal work. A financially independent woman is less likely to be left at the mercy of violent or abusive men.
MAIN POINTS
• 1.6bn for long-term housing for women and children fleeing domestic violence.
• $5000 financial assistance for DV victims.
• 500 frontline social workers to support women and children in crisis.
• Paid Parental Leave to be shared between both parents.
• Large companies to publish gender pay gaps.
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HIGHER EDUCATION VERDICT
Tim Dodd, Higher Education Editor
University students will lose the opportunity for the 10 per cent discount on their tuition fees they currently receive if they pay upfront instead of taking a HECS loan and paying later. This budget closes down that loophole, saving the government $144m over the next four years. That pays for nearly one-third of the cost of the budget’s biggest spend on students, $486m for a one-off boost of 20,000 new university places for courses in skill shortage areas like teaching, nursing and engineering. As they say, one hand gives while the other takes away.
MAIN POINTS
• $5.8m to support women entering science, engineering. technology and maths jobs and to encourage women entrepreneurs.
• $4.8m will be spent on quantum technology, including up to 20 new PhD research scholarships.
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NATIONAL SECURITY/DEFENCE VERDICT
Ben Packham, Foreign Affairs and Defence Correspondent
Inflation is proving to be a bigger enemy for Defence this year than Vladimir Putin or Xi Jinping, slashing up to $4.6bn from department’s purchasing over the next two years. Despite Richard Marles’ warnings of worsening strategic circumstances, Labor has done nothing to pump extra money into the portfolio.
The Albanese government’s first Defence budget is set to come it at under 2 per cent of GDP – the bipartisan benchmark which the Coalition also failed to hit in its final year in office. The real challenge, which neither side will own up to, is how the nation will pay for the nuclear submarines and other hi-tech capabilities needed to credibly deter an attack on Australia or its interests. The Defence budget will have to rise substantially, but where will the money come from?
MAIN POINTS
• No new money for subs, missiles or drones.
• Key projects such as the Hunter-class frigates continue to crawl along.
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HEALTH VERDICT
Natasha Robinson, Health Editor
Labor has marketed this health budget as “beginning the task of strengthening Medicare”. It claims this budget will “address a decade of cuts and neglect” and reaffirm general practice as the cornerstone of our health system.
But Labor’s rhetoric on Medicare does not match up to its actions. Medicare rebate for GP consultation items are now critically low after being frozen for the best part of a decade. Labor is not increasing rebates. It has ignored a request by doctors for a new MBS item number for 60-minute consultations to allow GPs to be reimbursed for complex care which they currently perform partly for free.
The $750 million Labor has allocated towards bolstering Medicare and making it fit-for-purpose will appear in the next federal budget in May. But right now, GPs are shutting up shop and patients are struggling to secure appointments because the viability of general practice is in crisis. Yet the government in incurring a huge capital spend and adding another layer to the health system through its establishment of 50 urgent care clinics at a cost of $235 million.
Like the urgent care clinics, Labor’s big-spending health measures in this budget are all election commitments, many very worthy, such as $452 million commitment over six years for the establishment of new comprehensive cancer centres in Brisbane and Adelaide. But it leaves little left to devote to immediate pressing concerns.
MAIN POINTS
• Fifty urgent care clinics to cost $235 million.
• $452 million over six years for new comprehensive cancer centres in Brisbane and Adelaide.
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