In Summary
This budget can be described as a human budget, dedicating more money to aged care, the Covid-19 vaccine roll-out, mental health, women, childcare and the Royal Commission into defence and veteran suicide. The emphasis on support for women, whether for childcare or domestic violence is not lost on us, nor the fact that this budget will put more money in the pockets of low income earners.
This is a budget to grow productivity and new technologies and opportunities for employees to upskill or retrain and for businesses to digitise.
Key initiatives include:
- Extension of temporary full expensing and loss-carry back providing immediate deductions for business investment in capital assets
- Introduction of a ‘patent box’ offering tax concessions on income derived from medical and biotech patents
- Tax and investment incentives for the digital economy
- Extension of the low and middle income tax offset
- Child care subsidy increase for families with multiple children
- $17.7 billion over 5 years to reform aged care
- $2.3 billion on mental health infrastructure and programs
- New and extended home ownership programs for first home owners and single parents
In his Budget speech, the Treasurer stated “Australia is coming back” with unemployment lower than pre pandemic levels (5.6%).
The deficit, thanks in part to surging iron ore prices, is lower than anticipated in the 2020-21 Federal Budget at $161 billion in 2020-21, a $52.7 billion improvement to estimates. The underlying cash balance is expected to be a deficit of $106.6 billion in 2021-22 and continue to improve over the forward estimates to a deficit of $57 billion in 2024-25. While the deficit is large, it did its job.
Real GDP grew strongly over the latter half of 2020, marking the first time on record when Australia has experienced two consecutive quarters of economic growth above 3% – output is expected to have exceeded its pre-pandemic level in the March quarter of 2021. Real GDP is forecast to grow by 1.25% in 2020-21, by 4.25% in 2021-22 and 2.5% in 2022-23. After falling by 2.5% in 2020, real GDP is expected to grow by 5.25% in 2021, and by 2.75% in 2022.
Key budget assumptions
A population-wide vaccination program is likely to be in place by the end of 2021.
- During 2021, localised outbreaks of COVID-19 are assumed to occur but are effectively contained.
- General social distancing restrictions and hygiene practices will continue until medical advice recommends removing them.
- No extended or sustained state border restrictions in place over the forecast period.
- A gradual return of temporary and permanent migrants from mid-2022. Small phased programs for international students will commence in late 2021 and gradually increase from 2022. The rate of international arrivals will continue to be constrained by state and territory quarantine caps over 2021 and the first half of 2022, with the exception of passengers from Safe Travel Zones.
- Inbound and outbound international travel is expected to remain low through to mid-2022, after which a gradual recovery in international tourism is assumed to occur.
