Federal Budget’s $87bn spending spree to drive jobs – and escape COVID’s economic pain

The Treasurer has pinned his hopes on a big-spending budget that cuts taxes for 10 million Aussies and aims to create 250,000 jobs to fast-track an escape from COVID chaos.

Jobs, tax cuts and 70,000 new apprenticeships are at the heart of an $87bn Federal Budget cash splash to boost Australia’s economy after COVID-19.

Treasurer Josh Frydenberg is banking on the spending spree to create 250,000 jobs in two years, drive unemployment below 5 per cent and fast-track the nation’s great escape from its biggest financial shock since the Great Depression.

The 2021 budget includes a $17.7bn package to overhaul aged care, $13.2bn extra for the NDIS, and a $2.3bn package to tackle mental health and suicide prevention.

South Australia’s slice of the GST will be $900m bigger than expected, coming in at $6.5bn for this financial year and growing to $6.7bn next year.

Young Australians wanting to retrain or upskill will get access to an extra 163,000 free and low-cost training courses through a $500m boost to the JobTrainer scheme, while $2.7bn will go towards creating 70,000 new apprenticeships.

Tax cuts of up to $1080 for 10 million Australians earning a low or middle income will also be extended another year at a cost of $7.8bn.

But the bold COVID-recovery strategy comes with a $1 trillion gross debt Australians will be paying off for a generation.

“This pandemic is far from over … but Australia is now well on the road to recovery,” Mr Frydenberg said in his Budget speech on Tuesday night.

“We are better placed than nearly any other country to meet the economic challenges that lie ahead.”

Treasurer Josh Frydenberg delivers the 2021/22 Federal Budget. Picture: Sam Mooy/Getty

The nation’s “economic engine” was “roaring back to life” with more people in work than before the pandemic and consumer sentiment at an 11-year high – but it has “come at a significant cost”, he said.

Rather than major budget cuts or austerity measures, the government will try to pay down debt by growing the economy through getting more people into jobs and sparking wage rises and inflation.

For the first time since before the global financial crisis, unemployment is forecast to stay below 5 per cent for three years, falling to 4.75 per cent by 2023 and remaining at 4.5 per cent until at least 2025.

It’s promising news for SA, which has the nation’s highest unemployment rate at 6.3 per cent.

Wage growth will remain sluggish this year, but will start to pick up over the following two years.

Childcare costs will be slashed for 250,000 families with multiple children under age five in a $1.2bn budget package, while women’s retirement savings will be boosted by axing the $450 threshold for superannuation to be paid on income.

A further $1.1bn will go towards tackling domestic violence as part of a focus on securing women’s safety, including money for more legal advice, counselling, emergency accommodation and financial support for those fleeing abusive relationships.

Up to 10,000 single parents will get help to buy a home with a deposit as low as 2 per cent under a new Family Home Guarantee.

New star ratings will be established for aged-care providers as part of a sweeping overhaul of the sector in the wake of the Royal Commission – although the budget stops short of some of its recommendations.

An extra 80,000 home care packages will be funded to significantly reduce the waiting list, and 33,800 free or low cost training courses will go towards helping new and existing aged care workers boost their qualifications.

A supplement towards nursing home residents’ care will also be lifted by $10 a day, among other changes.

An extra $84.5bn more tax revenue in Australia’s coffers will help pay for the new measures – including an extra $15bn for infrastructure projects designed to create jobs, such as the Truro bypass and Augusta Highway duplication in SA.

Tax relief for businesses will be extended another year and new measures will help drive post-COVID innovation in the medical and biotech sectors, including slashing tax paid on new patents developed in Australia to 17 per cent.

A $1.2bn digital economy boost, which includes $53.8m to create a national artificial intelligence centre and four AI and digital capability centres, are among the measures that could help SA’s economy.

Finance Minister Simon Birmingham told The Advertiser it leaned into advances being made around Lot Fourteen to attract new companies and start-ups.

He also said the GST “windfall” would enable states to invest in areas to create jobs and further support critical services like mental health.

Australia’s coffers will have $84.5bn more tax revenue than expected at last budget due to the nation’s faster-than-expected jobs recovery, which is helping fund the new spending.

The Federal Budget is $161bn in the red this year, but that’s $52.7bn lower than the $213.7bn deficit expected just over six months ago.

It’s forecast to drop to $106.6bn next year and to $57bn by 2025.

Net debt is also $85.7bn lower than expected at $617.5bn this year, and smaller than forecast next year at $729bn.

Australia’s gross debt will still soar past $1.058 trillion by 2023, but that’s a year later than expected in last year’s budget.

Economic growth will rocket forward by 4.25 per cent next financial year, then return to 2.5 per cent for 2022-23.

But Australia’s international border reopening, and the “gradual arrival” of overseas students and skilled migrants, isn’t forecast until 2022.

“The continued economic recovery will rely on the effective containment of COVID-19 outbreaks both here and abroad and will be a key factor in the timing of the reopening of international borders, which could weigh on the outlook for the tourism and education sectors,” the budget papers say.

Ongoing global trade tensions and further “trade actions” from China “continue to pose risks to the outlook for Australian exports”.

Analysis: No losers in PM’s big election pitch

By Claire Bickers

Scott Morrison is clearing the decks for a federal election with the $87bn cash splash in the 2021 budget.

There are virtually no losers in this budget, with tax cuts for 10 million workers, new training incentives and measures to create 250,000 jobs in two years all part of the agenda.

Budget cuts or ‘austerity’ measures to help pay down Australia’s whopping post-Covid-19 debt – set to reach $1 trillion – are nowhere in sight.

Instead, Treasurer Josh Frydenberg is banking on growing the economy by creating jobs, pushing unemployment to below 5 per cent, and sparking wage growth and inflation to help pay down debt while interest rates are at record lows.

The 2021 Budget also tackles issues the Opposition would have weaponised at the next election.

Almost $18bn will go towards overhauling aged care, which was critical in the wake of the Royal Commission’s horrific findings.

The Coalition has also been under pressure over its support for women after explosive rape and harassment claims rocked Canberra earlier this year.

The budget contains about $3.4bn to boost women’s safety and economic security.

It doesn’t go as far as paying superannuation on parental leave, which advocates said was a “no-brainer”.

But the package will still boost women’s retirement savings, help more mums get back into work with a $1.7bn childcare package, and boost measures to tackle domestic violence.

The aged-care package also goes a long way to meeting the Royal Commission’s recommendations, including funding 80,000 extra home-care packages, launching a star rating system, and boosting the workforce.

But it doesn’t meet all of them, and falls short of the $20bn the sector said was needed to overhaul aged care.

The PM may still not call an election until 2022.

It will depend largely on how the vaccine rollout continues to go this year, and whatever else the pandemic might throw at us.

But even the PM’s political rivals can’t deny Australia’s economic recovery has been remarkable, with more people in jobs than pre-COVID and unemployment forecast to fall below 5 per cent.

Unemployment took eight to ten years to bounce back from recessions in the 80s and 90s.

Trial to boost family law access

By Gabriel Polychronis

South Australia will be home to a nation-first trial that is expected to improve services and boost resources in the state’s family law system.

The federal government has allocated $26.9m over four years to improve access to legal assistance for family law matters in SA.

A pilot program will work to increase judicial and court resources in the state’s family law registry.

The commitment includes $6.8m a year on an ongoing basis after 2024-25.

It forms part of a $123.8m federal government plan to reform the country’s family law system.

The funding includes $60.8m over four years to improve family law case management by “delivering a safe, child-centred, accessible and efficient” system.

The initiatives will help the legal system cope with the added demand expected to arise from the federal government providing the Director of Public Prosecutions additional resources to prosecute more child sex offenders.

SA is receiving $200,000 for the placement of child protection and policing officials in family courts, with the aim of “information sharing” between the child protection and family violence systems, while promoting children’s wellbeing.

Originally published as Federal Budget’s $87bn spending spree to drive jobs – and escape COVID’s economic pain