Should we expect another COVID budget or an election budget?

Federal budget time is here again, and this year it’s one of the most anticipated budgets in recent times.

The last two budgets – the first of the COVID era – saw the 2019-20 focus of national debt reduction relegated well and truly to the back burner as the government sought to prop up businesses, individuals and the economy. With an election looming and the COVID threat apparently receding once more, will 2022 see the Coalition return to its former key issues in an effort to win back the hearts and minds of its traditional electoral base?

The last three Federal Budgets in review


As with the upcoming budget, Treasurer Josh Frydenberg’s first budget was an election budget. It forecast the first economic surplus in more than a decade, thanks in part to the flourishing resources sector.

Unemployment was predicted to remain steady at 5%, with GDP growing at 2.75%. With wages growth expected to be sluggish, the personal tax cuts announced on budget night would boost household disposable incomes, although some were not planned to take effect until July 2022.

For businesses, there was an increase in the size and scope of the instant asset write-off, and extra support for exporters. More funding was announced for ASIC and APRA, to implement the Banking Royal Commission’s recommendations.


Hello COVID, hello recession and high unemployment, goodbye surplus. In the light of the pandemic, the budget was postponed until October and projected the biggest deficit since World War Two.

However, the government expected economic recovery to be rapid, assisted by a big-spending budget focussing on job retention (extension of JobKeeper) and job creation (JobMaker, training and apprenticeships), backdating of 2022 personal tax cuts to July 2020, business tax incentives (including temporary full expensing and loss carry back), and significant spending on housing construction and infrastructure.


The second pandemic budget, with economic uncertainty still to the fore, continued to prioritise jobs and investment, while maintaining temporary low and middle income tax offsets (LMITO). Net debt was forecast to peak at 40.9% of GDP in June 2025.

Temporary full expensing and loss carry back for businesses were extended until 2023. There was record funding for schools, hospitals, aged care, mental health and the NDIS.

What to expect from the Federal Budget 2022

The 2022 Federal Budget will be delivered earlier than usual, on Tuesday 29th March, meaning that the federal election will likely be held in May.

The government’s bullish mid-year economic outlook was delivered in December last year, before the full effect of the Omicron variant became apparent. Since then there have been supply chain issues as businesses throughout Australia struggled with staff shortages, increased pressure on the healthcare sector and an apparent crisis in aged care. The CPI is on its steepest upward trajectory in recent times, and interest rates are expected to rise as early as July this year.

In addition, the war in Ukraine now puts new pressure on inflationary drivers, supply chains and is the new ‘unknown’. The government has also committed support for flood affected areas in Queensland and NSW which may affect other budget priorities.

How will this impact on the Treasurer’s likely announcements in March?

Although we don’t have a crystal ball, here’s a summary of what might reasonably be expected.

  • The economy

    While this year’s deficit is turning out to be less than forecast, the government must be aware that many voters are tiring of pandemic spending that, while assisting recovery, is certainly driving up prices and, probably, interest rates. With the worst of COVID, we hope, behind us, ‘living with COVID’ cannot mean accepting a permanently increasing national debt. There may be a tightening of spending in some areas, aimed at bringing the predicted June 2025 debt peak both forwards and downwards.

LMITO may be scrapped, to remove its impact on inflation, but it could prove costly at the ballot box. Anyone hoping for a plan for long-awaited significant tax reform shouldn’t hold their breath.

  • Business

    Labour shortages, supply chain problems and possible interest rate rises may have businesses hoping for budget sweeteners, but with temporary full expensing and loss carry back already extended until 2023, there may be very little more for them in the Treasurer’s bag, beyond some hoped-for support for systems digitalisation.

  • Health

Given the recent focus on problems in hospitals and aged care, it’s more than likely that there will be yet another increase in hospital funding, and also a boost for nursing homes and possibly the NDIS and mental health. The heralded fourth COVID vaccination will also need to be underwritten.

  • Jobs

The post-lockdown jobs boom is likely to signal an end to increases in employment-boosting measures.

  • Education

As overseas students return to fill university coffers once more, it’s unlikely there will be much additional spending on tertiary education, or indeed any education except possibly the struggling child care sector.

  • Climate change

Environmentalists’ wishlist of spending on renewable energy transmission infrastructure, electric vehicles infrastructure and incentives and local battery manufacture seem unlikely to be fulfilled this year. But there may still be some focus on limiting climate change, given that it’s an issue likely to figure significantly in the Opposition’s election campaign. Hydrogen energy may be high on the list.

  • Defence

The Federal government has already heavily invested into defence in the past. However, with the war in Ukraine, defence and humanitarian spending will come to the fore. This may be at the expense of debt reduction or spending in other areas. However, the government will need to be careful to keep strong economic growth in a fragile post-COVID economy.

A budget brake or a budget accelerator?

A lot can happen before 29th March, and it’s impossible to predict which economic levers will be pulled. Josh Frydenberg has recently said that it’s time to draw “some clear lines in the sand” to constrain government spending. On the other hand, it’s an election year, and the government will want to influence voters at the polls.
Keep watching this space, and if you’d like to discuss what the federal budget implications might be for your business, don’t hesitate to contact your local Bentleys advisor for a chat. We can help you get where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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