What you need to know in five minutes.Credit:Kathleen Adele
- Economic growth will reach 3.25 per cent in 2022-23, a slight decrease from the 3.5 per cent forecast in March, and then go down to 1.5 per cent in 2023-24 – a significant fall from the previously forecast 2.5 per cent.
- Australia’s unemployment rate is expected to fall to 3.75 per cent this year but then rise to 4.5 per cent over the following two years. However, this figure is still low by historical standards.
- Wages growth is currently 2.6 per cent and is expected to hover between 3 and 3.75 per cent over the next four years. However, the fact that inflation is rising faster means Australians won’t be getting a real pay rise for about 12 months.
What you should know: Prices have been soaring and unemployment is at record lows, but Australia’s economic growth is cooling. At the same time, wages haven’t kept up with price rises and aren’t expected to until 2023-24, something that Labor will be keenly aware of – and will need to do more to address in the next budget, due in May, than in this super-sized mid-year economic update.
Debt and deficit
- The 2021-22 net deficit has come in at $32 billion, which is $48 billion lower than the Coalition government forecast in March, and is expected to be $36.9 billion in 2022-23. Similarly, net debt is expected to reach $572.2 billion in 2022-23, well down on March’s forecast of $714.9 billion, and projected to reach $766.8 billion by 2025-26, down from the previously forecast $864.7 billion.
- These reductions in debt and deficit are driven in part by higher commodity prices (which are expected to moderate over the longer term), lower unemployment, and $22 billion in spending cuts or delays to some spending.
- As economic growth cools, net debt as a percentage of Australia’s gross domestic product is expected to increase and peak at 28.5 per cent in 2025-26.
What you should know: The years of COVID-driven spending are gone but the red ink remains. Treasurer Jim Chalmers’ budget is a cautious first step on the road to budget repair that avoids any major cuts, delivers election promises and begins the conversation about the tough choices Australia faces in the future to address the structural deficit.
Families and cost of living
- The treasurer says wages will start growing (eventually) and it is no longer government policy to keep pay packets low.
- A new National Housing Accord between governments, investors and industry – which is in addition to election promises to build more affordable housing – aims to get 1 million new homes built over five years from 2024.
- Paid parental leave has also been expanded to six months, at a cost of $530 million, but this change won’t be fully implemented until 2026. In two-parent families, a portion of the leave will be reserved for each to encourage shared parenting duties.
- The government will spend $4.7 billion over four years to make childcare cheaper for 1.26 million, but the changes don’t kick in until July 1, 2023.
What you should know: The government has bundled together cheaper childcare, an expanded paid parental leave scheme, cheaper medicines, more affordable housing and future wages growth as a $7.5 billion plan to deliver cost-of-living relief. But cheaper medicines won’t start until January 1, and the other measures begin even further into the future – while families are feeling the crunch now.
Defence and foreign affairs
- Funding for defence rises 8 per cent in 2022-23 and rises to more than 2 per cent of GDP over the next four years.
- Aid funding will rise to $1.4 billion over four years, with $900 million of that to be spent in the Pacific and $470 million for South-East Asia.
What you should know: After close to $50 billion in promises back in March to fund cyber warfare capabilities, increase the number of defence personnel to 80,000 people, and purchase equipment, this budget is very steady as she goes, as the government awaits strategic reviews due in March. Aid funding has increased and is squarely focused on the region.
- There’s $8.1 billion for priority rail and road projects, including nearly $2.6 billion for Victoria, just under $2.1 billion for Queensland, $1.4 billion for NSW and $630 million for Western Australia.
- The headline projects include $2.2 billion for Melbourne’s Suburban Rail loop, $866 million for Queensland’s Bruce Highway, $500 million to begin planning and early work on high-speed rail from Sydney to Newcastle, and $400 million for an Alice Springs to Halls Creek corridor upgrade.
- Funding for new dams has been slashed by $1.7 billion over four years.
What you should know: The headline figure for the Coalition’s last budget in March was $17.9 billion for priority rail and road projects. This time round, the numbers are smaller – $8.1 billion – in keeping with the limited ambition of Chalmers’ first budget.
- The housing accord between governments, investors and industry has been unveiled with a target to build one million new homes over five years, starting in 2024. To get it started, an initial $350 million down payment has been made to pay for 10,000 affordable homes.
- Election promises feature heavily, including the Housing Australia Future Fund, which aims to build an extra 30,000 social and affordable homes, a Help to Buy scheme that is supposed to get 40,000 eligible Australians into a home with a lower deposit, and a Regional First Home Buyer guarantee to create another 10,000 home owners each year.
What you should know: The fact Anthony Albanese grew up in social housing is central to his origin story, and affordable housing has been a central focus of the prime minister for years. This budget represents an expansion of Labor’s election promises.
- From January 1, the government’s election promise of cheaper medicines will be delivered. In practice, that means the PBS maximum co-payment to get a script filled will fall from $42.50 to $30.
- The states’ pitch to extend additional COVID funding beyond the end of 2022 has been denied, but $235 million will be spent over four years for so-called urgent care clinics to reduce pressure on public hospitals.
- There is also $2.6 billion in funding for COVID-19 vaccines and treatments for people who are at risk.
- The National Disability Insurance Scheme will cost $166.6 billion over four years, a rise of $8.8 billion, while the agency that runs the scheme will hire an extra 380 staff at a cost of $158.2 million. A fraud squad will be created to stop the scheme being rorted, at a cost of $126 million over four years.
What you should know: State government pleas to extend extra hospital funding have fallen on deaf ears, which all but guarantees a federal-state funding fight as the year draws to a close.
Education, skills and small business
- TAFE is a big winner, with the government to fund 480,000 fee-free places. Indigenous Australians, young people, jobseekers, unpaid carers and people with a disability will be given priority access. From January 1, 180,000 of the places will be available at a cost of $1 billion, and another 300,000 from 2024.
- Universities will have an extra 20,000 places funded over two years, at a cost of $485.5 million, with health, education, engineering and technology courses given priority.
- Ten thousand “new energy apprenticeships” will be offered to train people as electricians who could, for example, install solar power systems – and with support payments of up to $10,000 during their apprenticeship.
What you should know: Like much else in the budget, this package of measures is focused on delivering Labor’s pre-election promises and priorities. The higher education sector will welcome this extra spending, as will the business community, which is crying out for more skilled workers.
Climate and natural disasters
- There’s nearly $25 billion in climate change-related spending through until 2030. That includes $20 billion for Albanese’s election promise to upgrade the electricity grid so more renewable energy can be fed into the system.
- There’s $275 million to encourage the use of electric vehicles, $225 million for community batteries and household solar, and a $345 million cut to fringe benefits tax that will save employers who provide cars to their employees $9000 per year, or individuals $4700 per year.
- Disaster Relief Australia will be funded so more than 5000 volunteers will be ready when disasters strike, while $200 million will be put into a disaster-ready fund for prevention and resilience.
What you should know: While the funding promises across climate and natural disasters are largely just delivering pre-election commitments, they also emphasise there is a new government in charge and it has a different set of priorities.
Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.
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