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What You Need to Know:
- The Federal Budget will be held at 7:30pm on the 29th of March 2022.
- This is an “election budget”, with most expecting a May election, many of the funding pledges will be aimed at appealing to undecided voters.
- The deficit is expected to be around $67 billion (3.75% of GDP), 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.
- 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).
- Government debt is around $1 trillion.
- A $250 cash payment to low income earners, fuel excise cut, mental health services, $1bn for local manufacturing, and defence are expected to headline the budget.
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, any contentious budget issues will likely be politically weaponised.
- $250 cash payment to low income earners to counteract rising cost of living. It is understood that the government will keep these payments to $250 to prevent further stimulating the economy and worsening inflation.
- Large investment in mental health services. Specifically youth suicide, treatments, and new medicines. The prime minister has announced $260 million for youth mental health.
- Lowering of the fuel excise, currently set at 44.2 cents per litre. This is expected to be between 10 and 20 cents a litre for 6 months.
- The new home guarantee is being expanded to 50,000 places to stimulate young home ownership.
- $1 billion in local manufacturing.
- Increasing of child care subsidies.
- Defence spending to comprise 2.1% of GDP.
- JobSeeker and pension payments to 4.9 million people increased on March 20, adding an extra $2.2 billion to the budget.
- $15 million for a new battery in Broken Hill, to improve energy security in regional NSW.
- $500 million for Urannah Dam in central Queensland.
- $678 million for the sealing of 1,000km of the Outback Way.
- $2.26 billion for Adelaide's North-South corridor motorway.
- $74 million top-up for Perth city deal.
- $480 million to increase NBN speeds in rural Australia.
- $800 million for strategic and scientific research in Antarctica - this is seen as an investment in curbing China’s antarctic influence.
- $3.3 billion to NSW state infrastructure.
- $3.3 billion for Victorian state infrastructure.
- Adding $18 billion to the national infrastructure plan.
- Commitment of $1 billion to build the Sydney to Newcastle fast rail line.
Watch Out For:
- Low and Middle Income Tax Offset (LMITO), the LMITO was introduced by Scott Morrison in his last budget as treasurer, offering a $1080 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, it is unclear whether the Morrison government will scrap it in this budget.
- Stage 3 tax cuts. This simplification of the tax bracket was slated for 2024/25, lowering the income tax rate to 30% for those making between $45,000 and $200,000. There has been some speculation that the Coalition would bring this forward to this budget, should they scrap the LMITO. Stage 3 tax cuts are expected to cost the government $100bn in revenue over the next decade.
- 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 the budget reply speech, two days after Tuesday’s budget.
The Long Term State of the Budget:
How this years expected $67 billion deficit stacks up:
National Gross Debt:
How this years expected $1 trillion gross debt stacks up:
Follow GovConnex on budget night for a full summary of everything you need to know about the 2022 budget.