Australian Federal Budget 2021-22
The Government’s 2021-22 Budget presents a strong focus on job creation with a substantial economic stimulus package that highlights a distinct move away from its historical emphasis on budget surpluses. Better than predicted commodity prices and lower unemployment together with a relatively COVID free community has allowed the Government to capitalise on improving consumer and business confidence to create an environment that is conducive to economic growth while addressing key structural reforms in areas such as health, aged care and women’s economic security.
With Budget deficits now an accepted outcome of current Government fiscal policy, the Government has continued its focus on spending measures aimed at reducing the unemployment rate and providing a continuing stimulus to business to help strengthen the economic recovery as the effects of the pandemic locally begin to subside.
Australia is in a relatively unique position to have largely weathered the COVID storm without significant structural damage to the economy, in large part due to the massive Government support over the last 12 months through schemes such as JobKeeper, as well as strong commodity prices. However, the Government is now looking forward to building longer term measures that particularly support job creation and growth. It is hoped that the increased tax revenue through job growth will go some way to reducing future deficits and provide an easier path than resorting to significant spending cuts and austerity measures that could dampen economic recovery in the short term. Changes such as extending the low and middle income tax offset, less stringent employee share scheme rules, the increase to JobSeeker, the focus on education and child care as well as the large infrastructure spend and digital economy incentives are designed to cement improving consumer and business confidence and seek to build on Australia’s strong economic position relative to other countries. It has also allowed the Government to address shortfalls in key sectors such as health and aged care. Relaxation of tax and regulatory restraints as well as tax incentives for intellectual property aim to attract foreign investors and talent as well as free up cross border trade. They also highlight Australia as a jurisdiction that is not only stable politically and economically but also potentially as a place that is easier to do global business.
The challenge for the Government will be whether the stimulus measures will be enough in the longer term with closed borders expected for some time. This is particularly so given Australia’s economic growth has been traditionally underpinned by immigration. No doubt the Government is banking on the measures being enough to carry the economy through to a time when the global economy starts to get back to some normality.
All Budget 2021-22 documents are available to download from the Treasury’s Budget 2021-22 website.