By Megan Berry, Alexander Whittle & Jack Banister

With Australia now mostly free from community transmission of COVID-19, the Federal Government has pitched its 2021-22 Budget with two aims in mind: to accelerate the nation’s economic recovery and win the next election.

Pursuing these outcomes necessitates the suppression of the virus, which means that health is the other prominent theme of this budget.

For other sectors, the picture is not as straightforward. Now that the dust has settled,  the Michelson Alexander team has taken stock of the budget papers to assess how they might impact the key spaces in which we work.

The big picture

In 2019, Treasurer Josh Frydenberg declared with confidence that the national bottom line was “back in black”.

Two years and a pandemic later, that bottom line won’t be black for at least another decade.

The deficit for the 2021-22 budget is a staggering $161bn, which means that:

  • Australia’s net debt will reach $617.5bn, roughly 30% of national GDP
  • That debt will max out at just under a trillion dollars in 2025

As confronting as this economic picture is, the ongoing suppression of COVID-19 means it is still far, far prettier than the one Australia was staring at 12 months ago.

Although wage growth is predicted to stay flat at 1.5%, and inflation will remain at 1.75%, the current unemployment rate of 5.6% is just 0.4% higher than it was before the pandemic was declared. That number is expected to reach 5%, below pre-pandemic levels, by mid-2022.

In case there was any doubt about the government’s intentions, businesses will save $21bn through a raft of new tax measures, while personal tax cuts for low- and middle-income earners will save individuals $1,080 and couples $2,160.

The takeaway? The current emphasis on stimulus over savings will eventually flip when the time comes to balance the books. Planning for this moment is of paramount importance in all sectors, especially those that rely heavily on Federal funding.

Health

Given a health crisis pulled the budget into deficit, it should come as no surprise that there continues to be enormous spending in the health sector.

$1.9bn to drive the vaccine rollout, $1.1bn to extend the national COVID-19 response and $204.6mn to extend telehealth arrangements until December are prime examples. There’s also $43mn over four years to make medicines more available and affordable through the Pharmaceutical Benefits Scheme (PBS).

Besides any budget impacts, COVID-19 left our mental health care services in the spotlight. A $2.3bn commitment to mental health and suicide prevention services acknowledges that.

Regardless, questions remain over whether this funding is enough to alleviate the pressures caused by the pandemic.

The takeaway? Although the most acute outbreaks of COVID-19 itself are likely behind us, it’s hard to think of a time when health has been more prominent in the public conscience. Combined with the fact that the mental health impacts caused by the pandemic are predicted to continue for years, it’s difficult to see health sliding down the priority list anytime soon.

Given the impacts of COVID-19, it’s unsurprising that this budget was very health-focused.

Aged Care

In a similar vein, there’s a significant commitment of $17.7bn over five years to respond to the recently concluded Royal Commission into Aged Care Quality & Safety. The Commissioners’ final report, which also covered the impacts of COVID-19, recommended wholesale system reform.

Measures in this year’s budget lay good groundwork to improve the system, enabling more time for aged care residents with carers, improved food in some homes, 80,000 extra home care packages over two years, greater oversight, and more choice for consumers.

However, policy powerhouse Grattan Institute estimated a $10bn per year boost was needed to fix the broken system. The shortfall in this budget is clear: it makes little mention of supporting the aged care workforce. While the government will deliver an additional 33,800 training places for care workers, low and stagnant wage levels averaging out at around $22/hour may mean these places go unfilled and the workforce continues to decline.

The takeaway? This year’s budget falls $6.5bn per year short of expectations for reform-scale funding. COVID-19 demonstrated how frail the aged care system really is, and reform – without a budget to match – will be much harder to achieve.

This year’s budget falls short of stakeholder expectations for reform-scale funding for the aged-care sector.

The Women’s Budget

Criticism of the 2020 budget for ignoring women and the recent #MarchForJustice protests are the likely reasons that this budget was accompanied by the first women’s budget statement in years.

The key areas are women’s safety, economic security, and health and wellbeing. Highlights include the trial of Escaping Violence payments. These payments will include both immediate cash of up to $1,500 and up to $3,500 for in-kind help with expenses such as bonds and school fees.

The takeaway? This budget spends $3.4bn on initiatives related to women and gender equity. The question is whether it’s a one-off, or the start of a push for lasting change.

What about energy?

Although the Federal Government allocated $19.3mn for a renewable energy microgrid in northern Queensland and announced small investments to allow businesses to transition to, and develop low emissions technologies, critics have quickly labelled the renewables sector as the budget’s major loser.

The Clean Energy Council called the budget a “missed opportunity”, especially given its focus on economic recovery and infrastructure. In his reply speech, Opposition Leader Anthony Albanese outlined his belief that becoming a renewable energy superpower would aid pandemic recovery and called out the government for continued inaction on climate change.

The takeaway? While the pandemic forced the government to reconsider its emphasis on savings overspending, there is no change in the air when it comes to renewables and climate change.

Clean Energy

There are still plenty of issues capable of disrupting both major parties.

The WRAP!

The measures set out above are not typical funding priorities for the Coalition, however, there is no doubt these have, so far, helped Scott Morrison to reset his political agenda. Keep your eyes peeled for the next polling numbers. Our prediction is that things are about to tighten up.

There are still plenty of issues capable of disrupting both major parties. For the Coalition, these include Christian Porter, low vaccination uptake and potential COVID-19 outbreaks. For Labor, there is a risk that internal issues, especially around energy policy, could blunt its attack on the government less than 12 months out from an election.

We hope you’ve found this analysis useful. If you’ve got any questions about it or if you would like assistance in identifying how your organisation could make the most of the opportunities presented in this Budget, our team is on hand to provide practical support. Get in touch here!