Federal Budget 2021: What HR needs to know

The Federal Budget has been released for 2021, announcing  $121.4 billion in funding aimed at creating 250,000 more jobs and kickstarting Australia’s economy.

Announced last night, Treasurer Josh Frydenberg’s third budget looks to drive jobs growth by injecting cash into the public sector, infrastructure projects and the digital economy, as well as upskilling Australia’s workers. It marks a significant change from the Coalition government’s pre-pandemic approach to fiscal policy, with the ultimate aim of driving unemployment from the current 5.6% rate to below 5%.

Frydenberg has said unemployment will need to reach around 4.5% to stimulate the economy and spark growth in wages. Speaking in Parliament last night, Frydenberg said: “Tonight, I outline the Morrison Government’s plan to secure Australia’s economic recovery and build for the future.

“A plan that continues to protect Australians from COVID. A plan that creates more jobs. A plan that guarantees essential services. And a plan that builds a more resilient and secure Australia.”

But stimulating jobs comes at a cost. Frydenberg said the COVID-19 recession will see the deficit reach $161 billion this year, falling to $57 billion in 2024‑25. That figure is $52.7 billion lower than expected in last year’s Budget. Net debt will increase to $617.5 billion or 30% of GDP this year and peak at $980.6 billion or 40.9 per cent of GDP in June 2025.

In the lead up to the Budget release, Scott Morrison had been called on to address the gender inequality facing women in the workplace. Last year’s Budget was criticised for favouring male-dominated industries in its relief packages, despite the fact that women had been most seriously impacted by the pandemic.

Read more: Federal Budget 2021: Treasurer announces $1.7bn childcare package – but is it enough?

As a result, this year’s Budget includes $1.7billion to be invested in childcare over the next three years. The high cost of childcare in Australia coupled with lower wages compared to men means women tend to return to work part-time, if at all. If they were financially able to return to full-time work, not only would it boost the economy through income tax, but it would enable a smoother transition back into the workplace.

The policy changes include removing the $10,560 subsidy cap for parents with a combined income of over $189,390, and increasing the subsidy to 95% for families with more than one child in care at the same time. The $1.7 billion increase to subsidies spread over the next three years will boost the economy by $1.5 billion a year, according to the Treasury’s modelling. However, the measures do not come into place until July 2022, meaning families still have more than a year until they feel the result in their pockets. The increased subsidy also only benefits around 1 in four families – rather than the majority – and critics say the government has missed a huge opportunity to tackle the issue on a large scale.

Another big area of funding is upskilling the workforce to reduce the talent shortage facing businesses. With migration levels at a fraction of what they were pre-pandemic, Australia is suffering a critical skills gap in industries like IT, childcare and agedcare.

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Government money will be poured into initiatives like JobTrainer, which has been extended for another year, as well as improving skills in the digital economy and offering tax incentives for big-scale projects in the games development industry.

Tim Rawlings, Director at PwC's Skills for Australia told HRD: “The extension of JobTrainer is a major plus and will give Australia a better chance to come out of the pandemic better skilled than when we went in.

“Targeting skills investment at innovative approaches to upskill long term unemployed people is necessary and overdue.”

Lobbying groups have piled pressure on Scott Morrison in recent months to improve Australia’s capability in the digital sector, as well as making it easier for organisations to hire talent from abroad.

MYOB’s Chief Employee Experience Officer Helen Lea commended the government’s investment in the digital sector.

“The Digital Economy Strategy will drive substantial economic gains for Australia, with solid investment in areas we know will make a difference for the digitalisation of SMEs,” she told HRD. “We particularly applaud the investment in e-invoicing as a tool that will yield great productivity returns and shorter payment times for small business.”

Key investment areas impacting HR and the workplace:

• Skilled migration: $550 million will be spent over the next four years to make it easier for businesses to attract talent from overseas. Changes to tax rules will encourage employee share schemes and see simplified tax residency rules for individuals
• Childcare: A $1.7 billion package will remove the subsidy caps for higher-income earners and reduce the cost of childcare for families with two or more children in care. However, the changes will not apply until July 1, 2022.
• Digital economy: $1.2 billion digital economy package to encourage growth. It includes a 30% tax relief for video game development projects, a new pilot program for work-based digital cadetships, increased AI capability and funding for cyber security training
• Visa changes: International students working in hospitality and tourism will be able to work up to 40 hours a week, removing the previous 20-hour cap
• International border opening: Frydenberg has predicted that the border will reopen for skilled migrants by mid 2022
• Upskilling: $1bn will go to extending the JobTrainer program for another 12 months, offering people free or low-fee courses to work in sectors suffering shortages like aged care, IT, and childcare
• Deregulation measures: $120 million has been announced to reduce the burden on employers when it comes to regulating with the government, particularly around modern awards. Investment in regulation technology aims to streamline the process of complying with award pay and conditions, making it easier to create new jobs.