The 2022 Federal Budget is shaping up to be a special one. The Morrison government knows that their leadership is on the line, so they seem particularly keen to deliver a ‘budget for all’. Albanese and the Labor Party are hungry for a victory – so they’re making sure that this is a highly politicised budget process.
So just hours out from delivery, how is this year’s budget shaping up?
The focus for the government appears to be on delivering initiatives that will drive a favourable outcome at the upcoming Federal election. The ‘good news’ stories in this budget are designed to demonstrate why this government should be given a mandate to return for the next three years.
And there are some very strong arguments on that front. The Australian economy has performed far better than many felt we would over the past few years, and the forecast unemployment rate of 3.75 percent has potential to drive one of the strongest wages growth periods in the history of the Australian economy. Australian budgets are often about jobs, jobs, and jobs. The 2022 budget has a similar feel.
The opposition are also using the budget as an avenue for electioneering, and will exercise laser-like focus to debase this budget. Unsurprisingly, this will create a platform for them to put their credentials forward to run the country for the next three years.
I expect the opposition’s budget response will focus strongly on the cost of living pressures for everyday Australians, with Labor keen to call out the Morrison government’s lack of focus around this to date. They will undoubtedly argue that the Morrison Government is focussed on jobs, rather than cost of living increases.
This is a fascinating economic argument, illustrating the fundamental differences underlying Australia’s two-party political divide. It’s going to be an extremely interesting week, as the policies of both parties have their merits.
What are the critical areas we can expect to see covered in tonight’s budget delivery?
The past two Federal budgets have had a focus on keeping the economy moving while living under a cloud of COVID-created uncertainty. Treasurer Frydenberg’s main priority over the past two years has been to keep people working. To do this, Australia has used our strong credit rating and debt capacity to fund the economy (hello JobKeeper and JobSeeker).
This has resulted in a significant increase to the national debt level (although, our debt as a percentage of GDP is low when compared to many other countries. We only rank as 94th highest in this space). As we enter an era of inflationary times, it is appropriate that our debt levels are addressed within this budget. Increasing debt levels and higher interest rates do not make good bedfellows.
Fuel excise and fossil fuels
There are strong predictions for a cut in fuel excise. Coupled with other speculated incentives, this could be a clear step away from our reliance on fossil fuels – which is good for the country economically, geopolitically, and environmentally. There will, of course, be inevitable questions whether the government has done enough in this space.
Staff shortages are leading concerns being shared across all industries. The workforce shortage in aged care has clearly reached (and in some cases, gone beyond) the tipping point. We anticipate there will be some much-needed support from the budget in this space.
While the Government will try to hold many of its aces up its sleeve in the lead up to this evening’s budget release, what we know in terms of infrastructure spend so far is:
- $17.9 billion for extra funding of infrastructure projects
- $10 billion for an East Coast submarine base
- Modernisation of the mRNA vaccine plant in Victoria
- A $678 million upgrade to Outback Way, which links WA to QLD
- An extension of the apprentice wage subsidy
- SMEs to find it easier to win government infrastructure contracts
- Support for several gas projects
- Funding to promote the Great Barrier Reef
With a high level of focus on infrastructure projects, it is expected that Government departments will be required to work with smaller contractors, thereby breaking up major infrastructure projects into smaller sections. This is good, in theory, but it will be interesting to see how it translates. The reality often is that having multiple entities working on a major infrastructure project has the potential to result in slower and more costly project delivery. No doubt we’ll hear more about this is in the opposition’s budget response.
Jobs will, of course, be an overriding theme. Not just stimulating job activity, but also building skills within the community and, hopefully, helping unemployment levels in regional areas. It will be interesting to see what the government proposes to do on the migration front to alleviate some of the pressure on the jobs front.
There is ample opportunity for re-training and reskilling workers. This is effective on multiple levels – it keeps unemployment low, ensures our workforce is better equipped for a changing economy, and could alleviate some of the pressure being experienced by our labour and aged care industries.
At Bentleys, our team of experts will work through the night to produce their interpretation of what the 2022 Federal Budget means for you, your family, and your business.
We look forward to delivering these insights. If you’d like to have an informal conversation about how the budget may impact you and 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.