Australia's $6 billion shopping list: 5 issues the 2022 Budget must tackle
With the federal election around the corner, eyes will be on the 2022 Budget to see what direction a Morrison Government will take the nation.
Australia made its way through the height of the pandemic with huge amounts of government spending, but now the focus has shifted.
In the mid-year economic and fiscal outlook (MYEFO), Treasurer Josh Frydenberg signalled the Government had $6 billion in funding decisions it had already made, but not yet announced.
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Yahoo Finance spoke to the experts about what needed to be addressed in the coming Budget and what should be avoided.
Despite expectations that house prices are set to fall by around 10 per cent this year, property prices are still sky high.
Danielle Wood, CEO of the Grattan Institute, told Yahoo Finance there was plenty the Government could do to help.
“One idea we have been putting out is a national shares-equity scheme, where governments basically help co-fund the purchase of new houses for lower-income Australians,” Wood said.
“That would really help lower-income and younger Australians, as well as older renters, get into the market and get enough money for a deposit.”
Wood said it was unlikely the Morrison Government would make a stand on other measures that would help before an election.
“I don't expect they will do the big things in the lead-up to the election, which would either be trying to incentivise state governments to reform planning rules to increase supply or making a move on some of the tax concessions like the capital gains tax to scour negative gearing,” Wood said.
Stephen Miller, adviser at GSFM, told Yahoo Finance the Government should address exorbitant property taxes, but also said it was unlikely in the lead-up to the election.
“Perhaps another area worth exploring on the tax front is how the Commonwealth might assist the states in abolishing stamp duty and replacing that tax with more efficient property taxes,” Miller said.
“But, I would be surprised to see that aired with an election in the wind.”
Parental leave and childcare costs
Wood said coming out of COVID-19, helping women return to the workforce was a major issue the Government needed to focus on.
“The Government has done a little to try and make child care more affordable but I would argue they should go further,” she said.
“Something on parental leave would be a really good complement. So increasing parental leave and making it more gender-equal.”
Grattan has advocated for parental leave being extended to 26 weeks for each family with six weeks ‘use it or lose it’ for dads and partners.
“That has really great social benefits in terms of benefits for family well-being and for the children, but also longer-term economic benefits because it creates more space for women to participate in the paid workforce,” Wood said.
During COVID-19 the Federal Government took on a bigger share of state hospital funding.
Usually, the Commonwealth takes on 45 per cent of funding, but that was increased to 50 per cent to help during the pandemic.
Wood said that increased funding needed to continue.
p“It probably needs to stay at 50 er cent for another year because the system is still under significant pressure because of COVID, but also the backlog of surgeries that have to take place,” she said.
“I think otherwise it's going to be a substantial burden on state governments if the Commonwealth doesn't come to the table on that.”
Usually in an election year, the government in power will announce a range of grants to communities.
This year, Wood said that kind of spending would be irresponsible.
“There is a risk, because it's a pre-election budget, of the temptation to do a lot of grant spending and infrastructure spending that can be doled out in certain electorates,’ she said.
“We have an economy which is actually running reasonably strong, so it wouldn't make sense for the Government to be pumping in a whole lot of new fiscal stimulus.
“Frankly, it would be a waste of money and not a good use of taxpayers’ money.”
While everyone loves the idea of a tax cut, Wood a said it wouldn’t be a good idea to hand them out in this budget.
“There'll be a temptation, I think, to keep the low- and middle-income tax offset for another year,” Wood said.
“I don't think that is either fiscally or economically responsible.”
Miller said Australia was already considered a very low-tax nation, in comparison to others around the world, but unnecessary rises should be avoided.
“The budget needs to focus on charting a credible path toward balance without undue increases in the income-tax burden, particularly via 'bracket creep',” he said.
“Australia is generally a 'low-tax' country but its dependence on income taxes is very high.
“Having said that, I doubt that either side of politics has the stomach to pursue an increase in the GST to 'fund' income-tax reductions.”
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