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Economy

Federal budget lacks long-term plan to address future challenges

The Federal Budget relies on short-term quick fixes to address cost of living concerns, while missing the opportunity to set Australia on a stronger long-term path of future prosperity, says the Committee for Economic Development of Australia (CEDA).

“This Budget’s focus on temporary measures to alleviate rising costs-of-living such as cutting the fuel excise, cost of living tax offsets and one-off payments will be welcomed by many,” says CEDA Chief Economist Jarrod Ball. 
 
But the Budget has only taken modest steps to permanently lift the capacity of households to navigate the growing pressures on the economy.”  
 
“The $8.6 billion of cost-of-living measures mostly benefit income earners and motorists, with many income support recipients receiving the least relief from cost-of-living pressures. 
 
With growing inflationary pressures and interest rate rises on the horizon, cost-of-living pressures will not dissipate any time soon and these measures do not provide a long-term solution. 
 
“Better living standards for all Australians and insulating the economy and budget from global shocks requires stronger productivity growth. Temporary relief measures have been underwritten by the fiscal dividends of a commodities boom and better-than-expected economic recovery since the mid-year update, but future growth will not be this strong absent a major lift in productivity. 
 
“The Federal government has made it clear that it is relying on strong business-led growth to drive Australia’s economic recovery, yet the Budget does not go far enough to support this ambition. 
 
“While we commend the initiative to shake up employee share schemes and support the growth of Australian start-ups, this Budget misses the opportunity to leverage investment in technology on larger, targeted and specific investments, such as quantum computing capacity, that can enhance Australian competitive strengths and skills. 
 
Skills and workforce participation 
 
Australia must also take bolder steps on skills and workforce participationto take advantage of the opportunity of a roaring labour market and to address the challenges of skills shortages. 
 
“As the cost-of-living increases, the result is often more second income earners entering the workforce or needing to work more hours. The prohibitive cost of childcare can make these decisions uneconomic and acts as a disincentive. Recent childcare subsidy changes affected a small proportion of Australian families and does not substantially change how expensive childcare is in this country.” 
 
Instead, CEDA supports increasing the maximum Child Care Subsidy from 85 per cent to 95 per cent, flattening the taper rate and removing the annual cap. This change would deliver the greatest benefits in a sustainable manner. 
 
Continued increased investment in apprenticeships and substantially increased funding for a new National Skills Agreement will go some way to addressing Australia’s skills requirements in those fields, however skilled immigration is an important part of Australia’s investment agenda,” says Mr Ball 
 
CEDA would have liked this Budget to set out bolder strategies to accelerate the return of migrationstreamline Australia’s skilled migration processes and better identify and classify our skill needs, especially at a time of exceptionally low unemployment. 
 
Infrastructure 
 
New infrastructure investment announced in the Budget is entering a pipeline that is increasingly delayed and subject to major resource constraints across the country. 
 
“What we are hearing from industry is that we need better systems in place around how governments invest in infrastructure and an openness to more innovation within the tendering process. Now is the time for better coordination across governments to deliver better infrastructure outcomes in line with recent reports by Infrastructure Australia. 
 
Fiscal strategy 
 
This Budget illustrates the growing structural disconnect between the demands on government to continue to deliver the critical services Australia needs and the revenue required to deliver them sustainably. The Budget projects cumulative deficits of over $200 billion across the forward estimates 
 
This disconnect will now have to be addressed while sustainably managing Australia’s larger debt burdenduring a period of global volatility, ageing and increasing frequency of natural disasters. 
 
“CEDA continues to support a reset of the fiscal framework to address this challenge, including a review of the Charter of Budget Honesty Act and reinstituting disciplined program evaluation to continuously improve the design and delivery of the largest spending programs.” 
 
Aged Care 
 
“This Budget fails to adequately address the critical challenges facing Australia’s aged care sector of accessing skilled staff and low wages,” says Mr Ball. 
 
“There is an opportunity to promote retraining options for those returning to the health and caring sectors and address our skills needs in this space effectively through the provision of an essential skills visa. 
 
Making an extra 15,000 aged care training places available on top of the almost 34,000 in last year’s budget is a drop in the ocean. Prior to the pandemic, Australia needed 17,000 new aged care workers each year to meet the basic standards of care. Post-pandemic, workforce attrition has sped up making the task even harder.  
 
“Now every lever must be pulled to meet this shortage, including increased funding for wages and a new essential worker visa.”

About CEDA

CEDA – the Committee for Economic Development of Australia – is an independent, not-for-profit membership organisation.

We identify policy issues that matter for Australia’s future. We work to drive policies that deliver better economic, social and environmental outcomes for Australia. We deliver on our purpose by: Leveraging insights from our members to identify and understand the most important issues Australia faces. Facilitating collaboration and idea sharing to invoke imaginative, innovative and progressive policy solutions. Providing a platform to stimulate thinking, raise new ideas and debate critical and challenging issues. Influencing decision makers in government, business and the community by delivering objective information and expert analysis and advocating in support of our positions. CEDA's membership spans every state and territory and includes Australia's leading businesses, community organisations, government departments and academic institutions. The organisation was founded in 1960 by leading economist Sir Douglas Copland, and his legacy of applying economic analysis to practical problems to aid the development of Australia continues as we celebrate 60 years of influence, reform and impact across the nation.;
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