Australian Prime Minister Scott Morrison (L) and Treasurer Josh Frydenberg have just delivered the national budget. Photo: AFP/Peter Parks

Josh Frydenberg’s third budget aims to give Australia a post-pandemic soft landing, using revenue windfalls for spending and tax cuts rather than for slashing the deficit.

Its philosophy is very much gain, not pain, for a population that has endured the stress of the pandemic, albeit not the devastation experienced by so many other countries.

There are plenty of winners and minimal direct losers in a budget that lays the groundwork for an election that is still expected next year rather than this.

Hard decisions have been eschewed. Prime Minister Scott Morrison is trying to avoid offending voters.

The political prism of this budget is very much in the moment. As such, it leaves Opposition Leader Anthony Albanese little room. Excessive criticism and he risks sounding carping. Demands for too much more and he might be accused of irresponsibility.

The A$7.8 billion (US$6.09 billion) extension of the low and middle income tax offset is a carrot for Labor’s core constituency. Frydenberg told reporters the recipients were “the tradies and the truckies,” and “the teachers and the nurses.”

The budget dodges major reform, with the notable exception of aged care, which the royal commission’s scathing findings made unavoidable.

The deficit for the coming financial year is forecast to be $106.6 billion, only marginally below the December budget update forecast of about $108 billion.

Tens of billions of dollars in windfall revenue (from the faster-than-expected economic recovery, and high iron ore prices) have been distributed, rather than going to the bottom line.

At the end of the budget period, in 2024-25, the deficit will be an estimated $57 billion. Indeed, there is no surplus in sight in a decade.

Iron ore exports play a big role in Australia’s economy. Photo: AFP/Imaginechina

Without a policy U-turn, Frydenberg as treasurer will likely never deliver that “back in black” budget. Indeed, by the time there is a surplus, he might have served as prime minister, been in opposition, and departed politics.

But of course, after the next election, at some point there will be a change of policy, towards fiscal consolidation.

Frydenberg presents an optimistic picture for the economy in the coming financial year, with the caveat that the pandemic lurks and therefore so does uncertainty.

The budget forecasts unemployment falling to 5% next year and dropping to 4.5% by June 2024. Growth peaks at 4.25% next financial year, but slows after that.

Critics will say that given the state of the economy, and the amount of revenue, budget repair is being delayed too long. That won’t, of course, be the judgment of the public.

We can apply many measuring sticks to the budget, beyond the spending-versus-repair one.

The most obvious is its response to the aged care royal commission. The government is putting some $17.7 billion into the system, and there will be 80,000 additional home care packages (the waiting list is 100,000).

The experts will argue over the money and probably conclude it is not enough. Equally, the test must be whether the initiatives adequately address improving regulation and achieving a larger, better trained and remunerated workforce. The government makes the right noises but the judgment can only come later. The workforce issues are particularly challenging.

The size of the task is enormous, with a planned new funding model to improve quality and a goal of cultural reform. Health Minister Greg Hunt on Tuesday described it as a “once in a generation” reform. The program will take five years.

As foreshadowed, there are many initiatives for women – on safety, health and economic security. Reforms to child care benefit families, but women especially will be making comparisons with the more generous, less targeted Labor scheme.

Many individuals and businesses will be scrutinizing the budget for what it says about opening Australia back to the world.

The message is that it will be a slow path.

Migrants, temporary and permanent, will gradually start to come from mid next year.

Late this year, “small phased programs” of international students will start.

Inbound and outbound travelers will remain low for the next year.

But hey – it’s assumed “a population-wide vaccination program is likely to be in place by the end of 2021.” Let’s hope this is so – but it’s only an assumption.

By the end of next year, barring a fresh assault by the pandemic, we might – just might – be looking at more normality. And then we will be facing a more “normal” budget too, with its share of nasties.

Major cuts and new spending

  • $1.7 billion over the next four years for childcare, increasing the Child Care Subsidy to up to 95% for the second (and any further) children aged five years and under, and removing the annual cap of $10,560 from this financial year
  • $7.2 billion to extend low and middle income tax offset throughout this tax year, up to $1,080 for individuals and $2,160 for dual income couples
  • $2 billion over the next four years for mental health and suicide prevention services
  • $17.7 billion over the next five years for aged care, including $6.5 billion for 80,000 additional home care packages and $7.8 billion of services for residential care
  • $15.2 billion over the next 10 years for infrastructure, including $3.3 billion for NSW, $3 billion for Victoria and $3.2 billion for South Australia
  • $998.1 million over the next four years for initiatives to reduce and support victims of family violence
  • $464.7 million over the next two years in increased funding for onshore immigration detention and expansion of the Christmas Island detention center
  • $671.1 million in savings over the next five years in applying a four-year waiting period for new residents for welfare payments from January 1 2022
  • $400 million in reduced funding to universities over the past financial year
  • $107 million in savings over the next four years in reductions to the MBS subsidy of MRIs and multiple code claims
  • $1.1 billion in savings by replacing jobactive with a self-service digital portal for job seekers

Michelle Gratton is Professorial Fellow, University of Canberra.

This story first appeared on The Conversation website and is republished with permission. To see the original, please click here.