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A top economist has shone a spotlight on one of the most ‘beautiful’ things hidden in last night’s Budget – sustained low employment rates.
Deloitte Access Economics partner Chris Richardson said the ‘beautiful surprise’ hidden in the 2022 Budget was welcome, and also predicted interest rates would not rise any time soon.
‘It’s not mentioned in any headline anywhere, it’s only been a handful of months since the Treasury last updated us [and] they are now of the view that low unemployment rates in Australia can be sustained,’ he told Sunrise host David Koch on Wednesday.
‘Basically an extra 140,000 Australians can be in jobs from here on in. It looks as though we can run the Australian economy faster for longer, and that’s great.’
Deloitte Access Economics partner Chris Richardson (pictured) said the ‘beautiful surprise’ hidden in last night’s budget was sustained low employment rates
Those considered ‘winners’ in Treasurer Josh Frydenberg’s fourth budget were pensioners, carers, motorists, low to middle income earners and job seekers.
When asked if he thought there were any ‘losers’ the economist said of this budget: ‘If you’ve got a pulse and a vote then you’ve got some money.’
However, he said there were ‘hidden costs’ as well as some consequences of splashing cash on an already healthy economy, with unemployment predicted to reach 3.75 per cent in September, the lowest level since 1974.
‘When you drop extra money atop an economy that is pretty strong, you get higher inflation, that means our money doesn’t go as far,’ Mr Richardson explained.
‘You may annoy the Reserve Bank into an interest rate rise, so the cost of your mortgage goes up, and we import more and speed up other economies rather than ours.’
He said the welcomed cash splash will in turn put pressure on the RBA to push interest rates up faster, but not as soon as people might think.
‘We’ve got the view that is now unusual that the Reserve Bank will not be raising rates in the next few months. They’ll still do it, but it’s going to be the end of 2022 before they do it,’ Mr Richardson predicted.
He said like the Treasury, the RBA predicts the unemployment rate can remain lower for longer and will therefore take their time in raising interest rates.
Treasurer Josh Frydenberg (pictured on Tuesday night) said the Government’s plan to help the economy recover after the Covid-19 pandemic was working
Drivers, jobseekers and middle-income earners are big winners from last night’s budget – but state schools, the arts, and high earners have been left out in the cold.
Ten million Australians will get up to $1,500 back in their next tax return and another six million will get a $250 cash handout under the pre-election cash-splash budget that will also slash petrol prices.
How much tax will you get back?
$48,000 to $90,000: $1,500
$90,000 to $126,000: Between $420 and $1,500.
Less than $37,000: Up to $675
$37,000 to $48,000: Between $675 and $1,500
Australians earning less than $126,000 will from July 1 get an existing tax offset of up to $1,080 plus a bonus $420 to help manage the cost of living in a $4.1billion policy.
Meanwhile, a one-off payment of $250 will hit the accounts of pensioners, welfare recipients and veterans in April in a $1.5billion splash of taxpayer money.
Amid soaring petrol prices, the Government is spending $3billion to slash fuel duty in half for six months from tonight – saving an average household $300 over six months and families with two cars $700.
But there could be more cost of living pain on the horizon with interest rates predicted to rise from June, pushing up mortgages – and inflation set to hit 4.25 per cent, the highest in 14 years.
Treasurer Josh Frydenberg said the Government’s plan to help the economy recover after the Covid-19 pandemic was working, citing the country’s low unemployment rate.
‘Three years ago we said to the Australian people that under the Coalition, the economy would be stronger. We delivered,’ he said in his speech.
Mr Frydenberg has introduced a one-off $420 cost-of-living tax offset, costing a total of $4.1billion.
When combined with the already existing Low and Middle Income Tax Offset (LMITO) worth up to $1,080, Aussies could receive $1,500 after submitting their tax returns.
Ten million Australians will get up to $1,500 back in their next tax return and another six million will get a $250 cash handout under the pre-election cash-splash budget
Mr Frydenberg said the measure is a sensible way to give relief to Aussies struggling as prices of food and petrol soar.
‘Tonight the Morrison Government announces a new temporary, targeted and responsible cost of living package to ease these pressures,’ he said in his speech.
Who will get the $250 payment?
• Age Pension
• Disability Support Pension
• Parenting Payment
• Carer Payment
• Carer Allowance (if not in receipt of a primary income support payment)
• Jobseeker Payment
• Youth Allowance
• Austudy and Abstudy Living Allowance
• Double Orphan Pension
• Special Benefit
• Farm Household Allowance
• Pensioner Concession Card (PCC) holders
• Commonwealth Seniors Health Card holders
• Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.
‘This measure comes on top of the $40 billion in tax relief already provided by our Government since the start of the pandemic.
‘Under the Coalition taxes for hard-working Australians will always be lower.’
Due to spiralling petrol prices, fuel duty will be cut in half for the next six months from 44.2 cents a litres to 22.1 cents a litre – saving an average household with at least one car $300.
Petrol prices have surged to over $2.20 a litre in Australia amid soaring global inflation pressure and the Russian invasion of Ukraine.
‘A family with two cars who fill up once a week could save around $30 a week or around $700 over the next six months,’ Treasurer Josh Frydenberg said.
‘Whether you’re dropping the kids at school, driving to and from work or visiting family and friends, it will cost less.’
A one-off payment of $250 will hit the accounts of pensioners, welfare recipients and veterans in April in a $1.5billion splash of taxpayer money.
The cash to help ease increasing cost of living pressures will automatically go into the bank accounts of those eligible, of whom more than half are pensioners.
The Home Guarantee Scheme will expand to provide a further 50,000 places to support more first home buyers.
The scheme allows buyers to put down only a five per cent deposit, with the taxpayer stumping up the rest.
There will be an additional 35,000 places available for first home buyers, 5,000 places for single parents and 10,000 places for people who buy or build a new home in a regional area.
In a huge shake-up of paid parental leave, Dad and Partner Pay will now be combined with Parental Leave Pay to create a single scheme.
A one-off payment of $250 will hit the accounts of pensioners, welfare recipients and veterans in April in a $1.5billion splash of taxpayer money (pictured, shoppers in Sydney’s CBD)
The move will mean couples have access up to 20 weeks of paid leave to divide up between them as they choose.
The leave must be used within two years of having a child and will be granted to households with incomes below $350,000.
Single parents will also get an additional two weeks of Paid Parental Leave.
The changes will cost $346.1 million over five years and leave no-one worse off.
Meanwhile, record amounts of annual funding have been set aside for schools and universities in the federal budget.
The 2022/23 budget outlined $25.36 billion for schools in the upcoming financial year, while almost $20 billion has been allocated for higher education.
Treasurer Josh Frydenberg said $180 billion would be spent on education over the next four financial years.
The Budget will also include a range of measures to improve health.
Aboriginal Community Controlled Health Services will benefit from a four-year rolling funding agreement and annual increases from July 1, 2023.
Due to spiralling petrol prices, fuel duty will be cut in half for the next six months from 44.2 cents a litres to 22.1 cents a litre – saving an average household with at least one car $300
Winners and losers in the budget
Motorists – $300 saving per car over six months with fuel tax cut
Universities – extra spending on research commercialisation
Jobseekers – training to get into digital jobs
Low and middle-income earners – $420 cost of living relief
Regional Australians – extra road, rail, communications and business support
Underemployed – the underemployment rate stands at 6.6 per cent
State schools – Payments for state and territory government schools to drop by $796.5 million over four years
Recreation and culture – Drop of 13.9 per cent in real terms in spending over four years
Sport – Funding down 38.7 per cent in real terms over four years as community programs end
Health department bureaucrats – 381 positions to go as various programs come to an end
Some $61.2million will go towards the Australian Genomic Cancer Medical Centre to research and develop drugs for people with advanced cancers.
The Government’s national ice action strategy will received $315million over four years to extend the programme.
Health Minister Greg Hunt has announced $28.1million to establish a new agency – Genomics Australia – to support the integration of genomic medicine as a standard of healthcare in Australia.
The Government will also give $52.3million in funding for mental health service Lifeline Australia over four years from July 2022.
Medicare is expected to cost taxpayers around $126billion over four-year forward estimates.
The Government will also provide $49.5million over two years for an additional 15,000 subsidised Vocational Education and Training.
The allocation can be accessed by existing aged care workers and people interested in working in the aged care sector.
Treasurer Josh Frydenberg said the Government’s plan to help the economy recover after the Covid-19 pandemic was working, citing the country’s low unemployment rate
Economic forecasts at a glance
The consumer price index was tipped to hit 4.25 per cent by June 2022 – the highest since 2008 with average petrol prices well above $2 a litre
Headline inflation forecast to drop to 3 per cent by mid-2023 – which would still be on the high side of the Reserve Bank of Australia’s 2 to 3 per cent target
Jobless rate tipped to fall to 3.75 per cent by September 2022 – the lowest since August 1974 – and stay there until June 2025
February’s unemployment rate of 4 per cent equal lowest since 2008
Wage price index predicted to touch 3.25 per cent in 2022-23 – putting it above long-term average of 3 per cent for first time since mid-2013
Pay growth of 3.5 per cent forecast for 2024-25 and 2025-26
Budget deficit of $78billion tipped for 2022-23 making up 3.4 per cent of gross domestic product
That is smaller than the $134.2billion deficit in 2020-21 at the start of the pandemic which made up 6.5 per cent of GDP
Gross government debt now surpassing $1trillion in 2023-24 instead of 2022-23 as forecast last year
Value of government bonds to finance borrowing tipped to hit $977billion in 2022-23 (making up 42.5 per cent of GDP) and $1.056trillion in 2023-24 (making up 44.6 per cent of GDP)