Did the 2021-22 federal budget miss the right spending mark?

There are a number of important questions around whether the government is spending in the right areas with its 2021-22 federal budget, says Gigi Foster, Professor of Economics at UNSW Business School

Gigi Foster: So overall, I would give the budget a grade of about a C. And the reason for that is a combination of things. I think they're spending on some positive aspects of what I was expecting to see. And spending in ways that will help to get together employers and employees who were, unfortunately, taken apart during the last year. 

And so the spending towards employment services and traineeships and apprenticeships, I think they're all very positive, that will help us to reconnect to those factors of production and get Australia moving again. I also liked the tax cuts for the low and middle-income earners. I think that's a good idea. 

But on the other hand, there were some expenditures on items that seem to be not well linked to Australian welfare, and in particular, to Australian productivity growth and just general, sustainable wellbeing growth into the future.

So in relation to childcare, and specifically something I was looking forward to seeing, it does seem that the budget is focusing on sticker price relief - so cost relief for families. And that's part of the issue, but as many of us have been saying for a number of years now, it really isn't just about cost. Childcare is a social infrastructure component of Australia's capacity to create jobs, release labor and invest in the future of Australia.

Read more: Federal Budget 2021-22 earns a “C-grade” rating from economists

That's what childcare allows you to do. And so that kind of social infrastructure is incredibly valuable. And it isn't just about the cost, it's about accessibility, it is about the quality. And it's about sort of what are we providing there for families all over the country. So is the location and thinking about the architecture of it, things that we would think about in aged care actually, and that is something Frydenberg was speaking about, what are we doing with childcare workers? How are we retaining them? How are we making sure they're giving quality care, and they're looked after? 

So all of those kinds of concerns are really more about the supply of childcare and how we are intervening as a government to try to help to fix some of the problems that we've seen in childcare. They were kind of absent from Frydenberg's speech.

On the other hand, we did see this lovely aged care package. And we definitely talked about infrastructure. I mean, Josh Frydenberg talked a lot about infrastructure, but infrastructure in his speech was basically code for transportation. So we had rail projects, and we had all sorts of different bus things and whatever infrastructure that was about getting people from A to B - that's fine. But if you've got no place to put your kids while you're getting from place A to place B, then you're basically in a situation where you don't have the infrastructure you need to participate in the labor market. So that's what I would like to have seen more of.

Gigi Foster is a Professor in the School of Economics at UNSW Business School. She works in diverse fields including education, social influence, corruption, lab experiments, time use, behavioural economics, and Australian policy. For more information read Federal Budget 2021-22 earns a “C-grade” rating from economists.


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