Federal Budget 2021-22: Budget boost to secure Australia’s recovery
11 May 2021
Handing down his third budget, and second during the COVID-19 pandemic, Treasurer Josh Frydenberg has outlined the next phase of the Morrison Government’s plan to “secure Australia’s economic recovery” and to “keep Australians safe”. With an eye to the next federal election, the Treasurer has announced a ‘big-spending’ budget that focuses on lowering unemployment, infrastructure, women and aged care.
Headline measures announced in the Budget include a $15 billion increase to infrastructure spending, $20.7 billion in tax relief for businesses over the forward estimates by extending current schemes, $7.8 billion in tax relief for low and middle-income earners and a $1.7 billion package for childcare subsidy increases. Mr Frydenberg said the Budget contained record funding to “guarantee the essential services Australians rely on” while also providing incentives to businesses to “unleash a further wave of investment”.
Confirming the economic recovery has been quicker and stronger than expected since the publication of the mid-year budget update in December, Mr Frydenberg revealed the economy is forecast to grow by 1.25 per cent in 2020‑21, rising to 4.25 per cent in 2021‑22. Despite these strong results, Mr Frydenberg warned the pandemic is far from over and the global economic environment remains uncertain.
Off the back of higher income tax receipts, a reduced welfare bill and higher iron ore prices, the Budget papers show this year’s deficit is $52.7 billion lower than was expected in last year’s Budget handed down in October. However, the deficit will still reach $161 billion this year, falling to $57 billion in 2024‑25. The Budget shows net debt will increase to $617.5 billion or 30 per cent of GDP this year and peak at $980.6 billion or 40.9 per cent of GDP in June 2025.
The Treasurer has declared that Australia’s economic recovery is now well underway, and the nation must keep the momentum going. Mr Frydenberg has set a new ambitious unemployment target of below 5 per cent, a significant decrease from the current rate of 5.6 per cent. The Treasurer said this will be achieved through new investment in apprenticeships, jobs programs and tax relief.
The Budget also reveals the Government is aiming to have a population-wide vaccination program finished by December 2021, but international borders are not expected to reopen until 2022. An additional $1.9 billion has been allocated to support the rollout of vaccines, taking the Government’s total spend on the vaccine rollout and health system response to $20 billion.
Infrastructure spending continues to feature prominently in this year’s Budget, with a sizeable $110 billion in funding promised over the next decade to build and upgrade roads, rails and bridges. This will include new funding of $2 billion for a new Intermodal Terminal in Melbourne and more than $2 billion to upgrade the Great Western Highway in NSW.
In response to the Royal Commission into Aged Care Quality and Safety, the Treasurer announced a $17.7 billion aged care package which he said would ‘restore trust in the system’. The package includes funding for 80,000 new home care packages, an additional payment of $10 per resident per day, and support for over 33,000 new training places for personal carers. The NDIS is also set to receive a boost of $13.2 billion over four years and a further $2.3 billion has been committed to mental health care and suicide prevention.
As foreshadowed by the Prime Minister and Treasurer, the Government has acted on earlier promises to address widespread community concern about women’s welfare by including a $3.4 billion package to target women’s safety, economic security, health and wellbeing.
The Government has committed $270 billion over 10 years in defence capability, as well as providing additional $1.9 billion over the decade to strengthen national security, law enforcement and intelligence agencies.
The Treasurer said the Government will continue to support a resilient Australia, with a $10 billion government guarantee to make insurance more affordable in Northern Australia. With the Government coming under increased pressure to commit to more ambitious emissions targets and spend more money on green infrastructure and renewables, the Budget also allocates an additional $1.6 billion to fund priority technologies, including clean hydrogen and energy storage.
For further information on key portfolio measures, please refer to GRACosway’s detailed briefings:
- Defence, Foreign Affairs, Trade, Home Affairs and Attorney-General
- Health, Families and Social Services
- Infrastructure, Regional Development and Cities
- Communications and the Arts and Education, Skills and Small Business
- Resources, Energy and Industry
- Agriculture and Environment
KEY PARAMETERS 2021-22
- $161 billion deficit
- $617.5 billion in net debt, equal to 30 per cent of GDP
- Real GDP to grow by 4.25 per cent
- Unemployment rate to fall to 5 per cent, from 5.6 per cent.
- $445.6 billion in total tax receipts
- An additional $15.2 billion in spending on infrastructure
- 250,000 jobs to be created by the end of next financial year