Can unemployment really dip below 5%?
Treasurer Josh Frydenberg said Australia is ‘roaring back to life’ as he handed down the 2021 Federal Budget. With a focus on job creation, upskilling, infrastructure projects and the digital economy, the Coalition government is splashing the cash with the ultimate aim of driving unemployment below 5%.
He also revealed ambitious projections of vaccinating all Australians by the end of the year, and reopening the international borders by mid-2022. By the Coalition's standards, it is a big spending budget with $17.7 billion for reforming agedcare in the wake of the Royal Commission, $20.7 billion in tax relief for business and $13.2 billion to be spent on the NDIS.
Speaking to HRD, independent economist Nicki Hutley said the breadth of spending in this year’s budget shows the government is aiming to be “all things to all people”.
“Therefore, maybe they haven't managed to cover some things in as much detail as I would have liked, such as the childcare package. I would have rather seen more on getting female participation up because if you want to create jobs, like the Government’s own modelling shows, it has a great impact,” she said.
“But that said, the Government said this was a jobs budget, and the big incentives around apprenticeship funding and lower-cost training initiatives are really quite meaningful.
“Whether it will create the quarter of a million jobs that they have forecast, it's hard to tell.”
Australia is currently facing significant talent shortages in the agedcare, childcare, disability services and IT sectors. Much of this year’s budget is aimed at low-cost initiatives to allow people to train in those industries, as well as enabling businesses to create more jobs.
Employers will be given an extra $1.5 billion to hire 100,000 additional apprentices by March next year. Businesses will be reimbursed 50% of the apprentice or trainee’s wage for the first year. Over the next two years, a further 33,800 aged care workers are expected to be trained as part of the extended JobTrainer program.
But Hutley pointed out that while upskilling and job creation are both key factors, the average salary of those roles needs to be sufficient to attract people into the industry in the first place. Without the level of migration Australia usually experiences, businesses are currently relying almost exclusively on workers already in the country.
“If you don't pay the right wages, there’s nothing to provide the incentive for people,” she said.
“If unemployment is high then naturally people will look to other opportunities but it's got to be something that is attractive and I think that's the element that's missing here.
“There is a big question mark around the degree of success that we'll have with this program.”
The apprenticeship program first launched last year has been successful within the construction industry – another sector facing shortages – but it a sector that typically sees higher wages and is therefore more attractive from the outset.
“They've put an awful lot of stimulus into the economy so it is going to create jobs. The question is, will it be successful long-term? There's nothing in here that leaves you feeling that after the sugar hit, there is going to be a big, sustained change in the types of jobs, sectors and industries that need it.”
Hutley believes the Treasurer’s aim of pushing unemployment under 5% is achievable and for once, both monetary and fiscal policy is pointing in the same direction. But the bigger question is how long can the economic bounceback last?
While Scott Morrison has been trying to position Australia as a county with a thriving digital economy, Hutley said from this budget, it’s hard to see how the narrative will change from an economy dependent on mining to one with a mass of innovative high-tech, high value jobs.
And with an election looming in the next 18 months, it’s impossible not to look at this year’s Budget with a politician’s eye. By injecting large amounts of surplus into the economy – something the Coalition has never traditionally been in favour of – it seems that on the surface, everyone is a winner.
A far-reaching budget makes it harder for Labor to pick apart and also lays a better foundation from which the Coalition can launch an election campaign. Hutley said this year’s budget will invoke confidence in a lot of people across Australia, in turn encouraging them to spend and pushing up consumer confidence while the borders remain closed.
If Frydenberg is to be believed, Australia is “roaring back to life” – but the proof will be in the pudding.
