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What you need to know now:
The Federal Budget deficit is $78 billion, better than the mid-year budget review forecast of $98.9 billion.
The better than expected deficit is a result of record high iron ore/coal prices and a reduction in Covid stimulus/support payments.
This is an “election budget”, with most expecting a May 14 or 21 election, many of the funding pledges are aimed at appealing to undecided voters.
The 2021-22 budget deficit was last estimated to be $106.6 billion (5% of GDP).
The 2020-21 budget deficit was $161 billion (7.8% of GDP).
Gross Government debt is $817 billion, this is expected to increase to $1.2tn by 2026.
A $250 cash payment to low income earners, fuel excise cut, mental health services, $1bn for local manufacturing, $18bn for infrastructure and a surprise LMITO increase headline the budget.
The unemployment rate has fallen to 3.75%, the lowest since 1974.
Anthony Albanese’s budget reply speech could be delayed due to President Zelensky addressing the Australian parliament on Thursday evening.
Why it Matters:
The economy is front of mind for most of the electorate due to inflation and post-Covid debt.
This is an election budget, specific announcements could have an influence on the results in certain marginal seats.
Treasurer Josh Frydenberg is expected to be a major player in a Liberal party leadership contest if the Coalition loses the election. His record as treasurer will likely play a big part in his pitch to the party and public. Frydenberg also faces a stiff challenge in his seat of Kooyong from well funded independent Dr Monique Ryan, so any contentious budget issues will likely be politically weaponised.
The Important Announcements:
Cost of Living
$250 cash payment to low income earners to counteract rising cost of living. It is understood that the government kept these payments to $250 to prevent further stimulating the economy and worsening inflation.
Lowering of the fuel excise, currently set at 44.2 cents per litre to 22.1 cents per litre.
The new home guarantee is being expanded to 50,000 places to stimulate young home ownership.
Defence spending to comprise 2.1% of GDP.
$9bn to cybersecurity and intelligence.
$800 million for strategic and scientific research in Antarctica - this is seen as an investment in curbing China’s antarctic influence.
Space Command to counter China's influence in Space.
Large investment in mental health services. Specifically youth suicide, treatments, and new medicines. The prime minister has announced $260 million for youth mental health.
$49.5 million to subsidise training for people who want to work in the aged care sector, funding 15,000 places in vocational education.
$1.3bn to prevent domestic violence through emergency accommodation, access for legal and health services for women and children in need.
JobSeeker and pension payments to 4.9 million people increased on March 20, adding an extra $2.2 billion to the budget.
Increasing of child care subsidies.
An $18bn boost to the nation’s existing infrastructure pipeline has been announced:
$3.1 billion in new commitments to deliver the $3.6 billion Melbourne Intermodal Terminal Package (VIC), including:
$1.2 billion for the Beveridge Interstate Freight Terminal in Beveridge, taking the total investment to $1.62 billion;
$280 million for Road Connections, including Camerons Lane Interchange, to the Beveridge Interstate Freight Terminal;
$740 million for the Western Interstate Freight Terminal in Truganina; and
$920 million for the Outer Metropolitan Ring - South Rail connection to the Western Interstate Freight Terminal.
$1.6 billion for the Brisbane to the Sunshine Coast (Beerwah-Maroochydore) rail extension(QLD)
1.121 billion for the Brisbane to the Gold Coast (Kuraby – Beenleigh) faster rail upgrade(QLD)
$1 billion for the Sydney to Newcastle – (Tuggerah to Wyong) faster rail upgrade (NSW)
$678 million for Outback Way (NT, WA, QLD)
$336 million for the Pacific Highway - Wyong Town Centre (NSW)
$336 million for the Tasmanian Roads Package – Northern Roads Package – Stage 2 (TAS)
$200 million for the Marion Road – Anzac Highway to Cross Road (SA)
$145 million for the Thomas Road – Dual Carriageway – South Western Highway to Tonkin Highway and interchange at Tonkin Highway (WA)
$140 million for Regional Road Safety upgrades (WA)
$132 million for Central Australian Tourism Roads (NT)
$120 million for the Adelaide Hills Productivity and Road Safety Package (SA)
$46.7 million towards the Athllon Drive Duplication (ACT)
$2.264 billion for the North South Corridor - Torrens to Darlington (SA)
$352 million for the Milton Ulladulla Bypass (NSW)
$320 million for the Bunbury Outer Ring Road (Stages 2 and 3) (WA)
$200 million for the Tonkin Highway Stage 3 Extension (WA)
$45 million for the Ballarat to Ouyen – Future Priorities (VIC)
$68.5 million for the Cooktown to Weipa Corridor Upgrade bringing the total Australian Government funding to the corridor to $258.5 million (QLD)
$1 billion in local manufacturing.
$15 million for a new battery in Broken Hill, to improve energy security in regional NSW.
$5000 payment for new apprentices
Low and Middle Income Tax Offset (LMITO). The LMITO was introduced by Scott Morrison in his last budget as treasurer, offering a $1,080 tax refund to low to medium income earners. The LMITO was only meant to last one year, but has been extended for the previous two. In a surprise, the Coalition has increased the LMITO to $1,500, benefiting those making under $126,000 per year. Some had speculated that the Coalition would remove the LMITO in favour of bringing forward stage 3 tax cuts.
Watch the Treasurer's Full Speech:
If Labor forms government at the upcoming election, shadow Treasurer Jim Chalmers has vowed to hold a second budget later in the year to correct a “decade of rorts and waste”.
It is unclear what Labor plans to put in this second budget, and they are intentionally entering this election without large policy announcements. This small target strategy is proving successful so far.
More clarity will come in Anthony Albanese's budget reply speech, on Thursday the 31st of March.
A number of Labor MPs (Penny Wong, Kristina Keneally, Clare O'Neil, Terri Butler) have circulated this image today, summing up their coordinated response:
The Long Term State of the Budget:
How this years expected $78 billion deficit stacks up:
How this year's gross government debt stacks up:
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