Federal Budget 2021: Frydenberg’s optimistic recovery plan

By Melissa Coade

Tuesday May 11, 2021

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(Image: Adobe/stockphoto mania)

Treasurer Josh Frydenberg has used his budget to paint an optimistic and determined picture of Australia’s come back from the height of the COVID-19 pandemic. In this nation-building endeavour, all you have to do is bring your shovel — the commonwealth will pay for the raw materials for the road to recovery.

The government’s plan is to realise a vision of a more ‘dynamic and flexible economy’ that will strengthen the position of the nation’s households and businesses on the other side of this period in history. It’s key budget priorities pulls on levers to create more jobs, deliver essential services and and promote the health of Australians citizens. 

According to Frydenberg, the 2021 budget hinges on the values of the nation: reward for effort; the power of aspiration and enterprise; helping those in need; and personal responsibility. 

“Our economy is forecast to grow by 1 1⁄4% in 2020-21, rising to 4 1⁄4% in 2021-22,” the treasurer said.

“Employment is at a record high, with 75,000 more Australians in jobs than before the pandemic. And this budget will help to create more than 250,000 more jobs by the end of 2022-23.”

The revival of a resilient economy will be led by extra jobs in manufacturing, infrastructure, housing and the engineering construction sectors, he added, and future growth spurred by ‘shovel-ready’ projects — with a $110 billion investment pipeline over 10 years for the upgrade of major highways, railways or road safety measures. 

An additional $250 million federal contribution through the Building Better Regions Fund will also advance this jobs generating future-building.

The government’s budget narrative says Australia’s comparable economic and health success over the past 12 months is because the nation was in stable position when trouble hit our shores (thanks to Scott Morrison’s stewardship and vision). On the health front, the government also credited itself with avoiding the (comparable) catastrophic loss of life due to COVID-19 because of its ‘early and decisive’ response which totalled an unprecedented $311 billion in health and economic support. 

“We closed our borders. The prime minister established the National Cabinet. And unprecedented support is seeing the country through the biggest global economic shock since the Great Depression,” Frydenberg said. 

“We are better placed than nearly any other country to meet the economic challenges that lie ahead,” he added.

Without starting from a strong economic position, the treasurer argued that government initiatives such as JobKeeper and JobSeeker would not have been possible. Neither would a federal government cashflow boost to support more than 800,000 businesses and not-for-profit groups. In total, the direct economic support government has provided under the shadow of COVID-19 is $291 billion — a measure it describes as ‘temporary, targeted and proportionate to the shock’.

“Additional payments went to millions of pensioners, carers, veterans, and others on income support,” Frydenberg said. 

Fears about the financial hit Australia’s economy would take — equivalent to millions of lost jobs that would have been equated to losing the entire agriculture, construction and mining sectors combined — were never realised. Since his last budget in October 2020, Frydenberg said nearly 500,000 jobs have been created. 

The treasurer said the outcome has been ‘remarkable’, before his language of relief was replaced with a reminder that COVID-19 has come with a significant and unavoidable cost, also triggering Australia’s first recession in nearly 30 years. 

Now in official rebound mode (which is still only the first phase of the government’s fiscal and economic strategy), the commonwealth wants to hand the task of economic recovery over to the private sector to create jobs and drive unemployment down to pre-pandemic levels. 

“Eight out of 10 jobs are in the private sector. A sustainable recovery requires a strong private sector. Our record investment incentives are filling the order books of the nation,” Frydenberg said.

According to Treasury, Australia’s net debt is expected to peak as a share of GDP at 40.9%. Compared to most other advanced economies, the budget papers say Australia’s debt-to-GDP ratio is low and fiscally sustainable.

The nation’s underlying cash balance is expected to be a deficit of $161 billion in 2021-22. Over the forward estimates, the government hopes the deficit will shrink to $57 billion. 

With a view to bolstering public health and moving to re-open Australia’s borders, the government also announced $1.9 billion to be allocated for the rollout of more COVID-19 vaccines and said it would contribute a further $1.5 billion for COVID-19 testing and tracing, respiratory clinics and telehealth services. This makes a total of $20 billion in federal money, past and future, that has been shuffled into efforts to get the population vaccinated and improve the national health system response to the pandemic. 

“This pandemic is far from over. Around the world, there are around 800,000 new cases per day,” Frydenberg said.

“The global economic environment remains uncertain […] but, Australia is now well on the road to recovery.”

How the 2021 budget will buoy the APS and program delivery

Data from the budget’s expenses and net capital investment shows federal spending growing by 18.4% in real terms in 2020-21, reflecting the government’s response to the pandemic. Meanwhile, the spend on general sector payment is projected to decline this year by 12.6% due to the wind-up of several elements of the government’s ‘temporary and targeted’ responses to COVID-19. 

Health enjoys the greatest windfall compared to the expenses allocation it was given last year, with a breakdown of the government’s expenses estimates by functions showing that the department will get an additional $3.75 billion with a total of more than $98 billion. The Treasury is attributing the increase to extra support for the States to go to public hospitals.

Defence is also getting an extra boost in this budget, with about $1.09 billion to make good on plans recommended in the 2016 Defence White Paper and the 2020 Force Structure Plan.

Housing and community amenities programs have increased to over $7.8 billion, mostly as a result of the HomeBuilder program and a number of urban and regional development measures. When the HomeBuilder program phases out, Treasury estimates a decrease in money flowing to this government function from 2022 to 2025.

Social security and welfare programs will see a decrease in funding (even though the most significant component of government spending — at 35.6% — relates to this public service function) from over $225 billion to $209 billion.

APS staffing levels

What the budget has to deliver in terms of agency resourcing is a mixed bag. The government notes that it has now entered a phase that requires an uplift in APS staffing resources, with money allocated for a boost that will deliver an additional 5,367 staff in 2021-22. 

The big department and agency winners in this year’s budget include those in the portfolios of Home Affairs (1,411 additional staff), Health (976 additional staff), Treasury (738 additional staff), Prime Minister and Cabinet (385 additional staff), plus extra public servants to the work of Veterans’ Affairs (447). 

But the emphasis on more ‘efficient and effective’ ways of delivering service to the public means that the decision to boost staffing levels this financial year is being carefully handled ‘in line with the federal policy to manage the size of government administration’. Moderate staffing level growth is expected over the medium and longer term, according to the budget papers, based on continued deliberate workforce planning and ‘as Australia recovers its equilibrium’ and returns to normal rates of economic and population growth. 

“Some uplift in average staffing level (ASL) is temporary and will naturally decline when relevant policies cease,” Treasury warns.

“Sustainment of some of this additional ASL will continue to be required over much of the forward estimates. However, recent growth is expected to be moderate as the economy continues to recover and grow, while the continued investment in digital capabilities will support further ASL prioritisation in future years.”

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