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This Budget delivers on jobs and makes critical social investments, but more will need to be done to sustain strong growth while international borders remain closed, says the Committee for Economic Development of Australia (CEDA).
CEDA Chief Economist Jarrod Ball said our record run of uninterrupted economic growth before the pandemic gave us room to manage the fall-out of the COVID-19 economic crisis.
“We will now need to set another record of sustained growth to manage the twin challenges of an ageing population and our new fiscal reality,” Mr Ball said.
“This will require a significant and sustained lift in business investment, the likes of which we have not seen in a decade or more, and will be very challenging to achieve while borders remain closed.
“The focus on skills, better jobs matching and participation are all critical and there is little room for anything other than complete success on these fronts.
“Initiatives such as the patent box are important signals of the Government’s preparedness to support risk taking and innovation. To realise the ambition to be a leading digital economy we will need to be courageous in pushing our digital and tech agenda.
“This is the right overarching fiscal strategy given the lessons of past crises, but it raises the stakes for next year’s Budget, which will need to land the transition to private-sector led investment and job creation.
“This Budget continues to provide significant near-term support for demand across the economy, from housing construction to local tourism, but with buoyant business conditions and emerging skills shortages, attention will need to increasingly shift to the supply side – further building Australia’s digital agility and capacity, skills and business innovation.”
The Budget forecasts that migration will not resume until mid-next year, and even then, only gradually.
“Population growth is at the lowest level in a century. This is a stark shift for a country that enjoyed one of the highest rates of population growth among advanced economies in the last decade,” Mr Ball said.
“We need a much bigger investment in quarantine.
“With Australia’s slow vaccine rollout and the likelihood of quarantine remaining in place for at least the next two years, the Federal Government must move urgently to expand quarantine capacity."
The Budget papers also show net overseas migration is forecast to drop even further than expected – down to -96,600 this year, and -77,400 next year, before ramping up again in 2023.
“We know Australian employers are crying out for skilled migrants – our members have been telling us this for months,” Mr Ball said.
“If we don’t find a way to increase our capacity, we risk losing out on the global talent we need to support growth and investment in fast-growing and recovering sectors.”
Australia’s success in coming decades requires a dynamic, competitive and vibrant business sector that is innovating and creating new sources of value in our economy.
The move to extend the temporary full expensing and temporary loss carry-back measures until mid-2023 is a positive step.
“The $20.7 billion in total business tax relief these measures will bring is welcome - the full expensing measure has already created some green shoots of business investment,” Mr Ball said.
“But more permanent investment allowances are needed to lock-in a recovery in business investment.”
The Government has unveiled a $1.2 billion Digital Economy Strategy in this Budget, that it says will lay the foundations “for Australia to be a leading digital economy and society by 2030”.
These initiatives are wide-ranging, covering: faster depreciation of intangible assets; an overhaul of MyGov; funding for digital skills training; an investment in Australia’s Artificial Intelligence (AI) capability; and accelerating the rollout of the Consumer Data Right.
“The Digital Economy Strategy is a good start, but bolder steps will be required to secure the digital and data-led growth necessary for Australia to truly become a leading digital nation by 2030,” Mr Ball said.
“COVID-19 accelerated our reliance on digital technologies, and it is great that the Government is now firmly focused on this area, but we can no longer afford to be a follower. Making the most of the advances we’ve made is critically important to maintaining the momentum behind Australia’s recovery.”
The $500 million extension of the Jobtrainer program is an important investment in Australia’s human capital to help a further 163,000 job seekers, school leavers and young people in areas of “genuine need” reskill and upskill.
“With a quarter of a million Australians in long term unemployment and almost half of these under the age of 35 it is critical we reconnect them to skills, training and employment,” Mr Ball said.
There is still some way to achieve equity for women on a wide range of indicators. Considering this, the comprehensive package is welcome, and we look forward to this progress being sustained and reported on in coming Federal Budgets.
“The Budget provides a significant and badly needed investment in aged care, but the Government will need to make more sustained progress in improving the sector to address the issues raised through the aged care royal commission and increasing community expectations."
Mr Ball said the three positives addressed in the Budget for aged care were funding for home-care packages, additional training places and an increase of staffing minutes per day per resident to 200 minutes on average.
“The Budget only delivers funding for 80,000 new home-care packages over two years, while the royal commission recommended that the waiting list of around 100,000 should be cleared this year.
“With continuing low wages in the sector, it will also be difficult to attract people to the new training places, and the increase in care minutes per day only brings us up to minimum care standards in other countries.
The Government’s $1.7 billion changes to the Child Care Subsidy for second and subsequent children, as well as removing the annual cap, are a positive step. The commitment of universal access to 15 hours of preschool per week is also welcome.
“These changes will help some parents to increase their workforce participation,” Mr Ball said.
"But we are concerned that without oversight, they could potentially lead providers to increase their fees, limiting the effectiveness of these measures.”
The Budget keeps up momentum on infrastructure funding with almost $57 billion committed over the forward estimates, focused on road and rail projects.
“We must focus on disciplined delivery of existing projects and aligning investments to trends that accelerated through the pandemic such as digitisation, more local and regional infrastructure and adaptation of existing infrastructure,” Mr Ball said.
CEDA’s research team is available for comment on the Federal Budget, with a particular focus on: migration, aged care and child care, technology and business investment and dynamism.
Jarrod Ball, Chief Economist
Gabriela D’Souza, Senior Economist
Cassandra Winzar, Senior Economist (WA)
Melissa Wilson, Senior Economist
Melinda Cilento, Chief Executive
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CEDA – the Committee for Economic Development of Australia – is an independent, not-for-profit membership organisation.