Politics

Josh Frydenberg to stash spending plans away ahead of 2022 federal election


While the government has picked up $106 billion in extra revenue, expenditure – much of it related to COVID-19 and the National Disability Insurance Scheme (NDIS) – has been pushed up by $55.7 billion over the next four years.

The fallout from this year’s Delta coronavirus outbreak has contributed to $12.3 billion in extra spending this financial year. But spending has been pushed up further out. Spending in 2023-24 has been forecast upward by $17 billion.

The budget papers show the government preparing for the election. It has set aside almost $16 billion in “decisions taken but not yet announced”. The largest proportion, $5.6 billion, is due to hit the budget in the current financial year with another $4.1 billion in 2022-23.

Mr Frydenberg said the update showed the strength of the economy.

GDP is expected to grow 3.75 per cent this financial year and by 3.5 per cent the following year.

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Inflation has been upwardly revised, to reach 2.75 per cent this year before drifting slower to 2.5 per cent in 2022-23.

Wages, however, are only expected to grow by 2.25 per cent this year – confirming a real fall in wages for most Australians. In 2022-23, wages are tipped to grow by 2.75 per cent. That would be the first time wages outpace inflation this decade.

Household consumption is tipped to be strong next financial year along with mining and non-mining investment.

Mr Frydenberg said this year’s tax cuts were adding strength to the economy.

“Income tax cuts and a strong recovery in the labour market is seeing household consumption increase at its fastest pace in more than two decades,” he said. “Temporary tax incentives will drive the strongest increase in business investment since the mining boom, with non-mining investment expected to reach record levels.”

Treasury said the overall jobs market looked positive, with high numbers of vacancies and job ads.

The jobless rate is tipped to average 5.25 per cent in the December quarter before falling to 4.25 per cent in the June quarter of 2023.

“In addition, there is evidence that labour mobility and dynamism is recovering, following a sharp decline during the pandemic,” it said.

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“Previous Treasury research found that periods with high rates of job-to-job switching are often associated with stronger wage growth, even for those workers remaining in their jobs.”

The government said over the medium term, the state of the budget had deteriorated “slightly” since May, saying this was largely due to growth in NDIS expenditure.

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