"Pretty good, but not great": highlights of the Federal Budget
The Federal Government’s 2020-21 Budget was generally well-received among economists and focused on many important areas, with UNSW Business School's Professor Gigi Foster giving it a “B-grade” overall
I give the budget overall about a B-grade. I think it was pretty good, but not great.
I think some of the highlights for me included the support for business investment embodied in the immediate asset write-off provision and also the loss carryback provision. I would have liked to have seen a movement in the direction of establishing revenue contingent loans for businesses, because I think that would assist in a longer-run way, with transitioning from just giving handouts or one-off special deals, to a system that's more sustainable and provides a leg up for business investment, rather than necessarily just a free for all in a short-run period – whether that's handing out cheques or handing out special accounting rules. But I still liked the idea that they were trying to support investment.
I also like the idea of focusing on younger workers with the JobMaker scheme. Though, I'm not sure that the quantity of the incentive there is going to be enough to actually nudge employers into making hiring decisions that they otherwise wouldn't have made.
I also really like the announcement about this Your Super tool, where Australians can go online, like they can now with My School tool, and compare different options for their superannuation. This is particularly nice, in my view, because Australia’s superannuation industry is notoriously inefficient. It creams a large amount off the top of superannuation balances every year, about 1 per cent. To my knowledge, and that is about 10 times the amount that's best in class, which you see in Norway. So I would like to see more of a push towards competition in that industry.
And even in addition to being able to compare different options of managed funds, I'd love to see the government provide an option for individuals to establish their own tax-preferred retirement support accounts.
I do think that the biggest omission in the budget, from my perspective, was not enough attention to caring occupations, in particular, universal basic childcare which for me is a no-brainer, because it has a triple benefit for Australia.
It provides jobs everywhere in Australia, because children are everywhere in the cities and in the regions. It provides relief to those working families and the ability to release their labor into the labor force if they would like to. And it also is a wonderful investment into the future productivity and welfare of our country. So I don't see why the government isn't moving much more radically in that direction.
I also would like to see a bit more resource and thought put into how to resource the aged care industry. There was a bit of support for that, along with some other supports that I like – some of the small scale infrastructure and some of the support for mental health. But I thought that those two things really could have been done a lot better.
I'm not worried about the debt, per se. I'm worried about how we're spending the money. We want the right kinds of expenditure programs. What we don't want are massive blowout boondoggle projects. And unfortunately, in Australia, we have seen some of that, particularly in the area of large infrastructure projects. So when we say we want spending on infrastructure, sure. But we don't want big contracts to top-heavy contractors who are just going to rent seek and grab extra money out of the Australian purse. What we want are much smaller scale, much less snazzy fancy projects that will actually help Australians on the street – not necessarily handled by big construction companies.
Now, those are not as politically appealing. But they're actually more helpful for the country. So that's the sort of thing I do worry about. I'm not that concerned about the levels of debt, per se. Again, if we compare our levels of debt, debt to GDP ratio here in Australia, to other countries during this whole COVID recession, period, we don't look that much worse. So I don't think it's something we need to worry about as long as we're spending in a direction which will get the country more productive in the longer run.
Professor Gigi Foster is Director of Education for the School of Economics at UNSW Business School. For more information read Why economists are giving the Federal Budget a “B-grade” rating.