Finance Federal Budget The five budget questions Josh Frydenberg is yet to answer

The five budget questions Josh Frydenberg is yet to answer

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Treasurer Josh Frydenberg will have plenty of answers on Tuesday night as he hands down what is widely expected to be a big-spending budget.

But with the pandemic still raging, the government under pressure to take more climate action, and the jobless rate higher than it was this time last year, there are even more questions hanging over the government’s agenda.

1. Will we boost vaccine investment?

The vaccine rollout has failed to live up to expectations.

More than 2.6 million COVID-19 jabs have been delivered so far, but because of side effects associated with the AstraZeneca vaccine, we are waiting for an additional 20 million Pfizer doses expected to arrive later this year.

The budget will outlay almost $3.5 billion on vaccine spending, building on about $3.5 billion that has already been announced, but we don’t know if more money will be spent to manufacture mRNA vaccines (like Pfizer) locally.

And that’s despite the government spending $2 million on a business case for local mRNA manufacturing last year.

Another question mark is our approach to quarantine.

The government has invested $500 million on upgrades to the Howard Springs facility in the Northern Territory, increasing its capacity from 800 to 2000.

And the Victorian government wants another $700 million from the Commonwealth to help it construct a 3000-bed facility near Mickleham, a move that would expand national quarantine capacity substantially.

So, how much will the government ultimately cough up?

2. Will we have a green recovery?

Australia is under pressure to commit to more ambitious emissions targets and spend more money on green infrastructure and renewables.

The European Union will soon start taxing climate laggards and the United States is pushing Australia to focus on climate plans.

We’re expecting $539 million for lower-emission hydrogen, carbon capture and storage projects in the budget, but the government has refused to commit to net-zero emissions by 2050.

A further $800 million has also been set aside to fund new climate change and disaster mitigation bodies, alongside a new climate service to model the impact of extreme weather events.

But Climate Council economist Nicki Hutley said that’s not enough.

“They’re investing all this money in adapting, but not investing in these things that cause the circumstances against which we need to mitigate,” Ms Hutley told TND. 

She said the money on offer was “a drop in the bucket” and new investment in renewables should be in the billions of dollars every year.

Meanwhile, the government has already outlaid more than $100 million over the next four years under its gas-fired recovery plan and on Tuesday will pledge another $58.6 million for even more gas infrastructure.

3. What will happen to vocational education?

Skills and employment has emerged as a key focus since the pandemic, but the government’s record so far is hit and miss.

The JobTrainer program – which provides low-cost certificates and subsidies for employers who take on apprentices or trainees – has supported tens of thousands of jobs and vocational education places so far and will be extended for another year.

But the $4 billion JobMaker program – which offered hiring credits for businesses that hire new staff – is a flop and likely to be axed.

The unanswered skills question is, how will the government reform the National Agreement for Skills and Workforce Development (NASWD)?

The NASWD is the key agreement governing how the Commonwealth provides $1.5 billion in annual funding to the states for vocational education (VET).

Last August, Scott Morrison struck a deal with state and territory premiers agreeing to finalise a reformed national skills agreement by August 2021, one that detailed how much money was handed over.

The Prime Minister wants more quality assurances over VET money and more visibility (read: control) over how the money is spent by the states.

Without those promises, the government has said it won’t tip in more money.

4. Will the budget help boost wages?

Wages growth fell to record lows last year and getting the labour market tight enough to push up pay packets is a goal Mr Frydenberg set for the federal government in his pre-budget speech.

But that’s easier said than done.

The Reserve Bank doesn’t expect wages to pick up enough for the economy to achieve its inflation target until 2024, even though it now expects the jobless rate to fall to 4.5 per cent by the end of next year.

So what will the government do to help?

Based on current commitments, we can expect government spending to increase by $6.6 billion overall in 2021-22, according to Deloitte Access Economics.

It’s hard to say whether that will be enough to get wages moving until we see the full budget.

But Indeed APAC economist Callam Pickering said government policy was our best bet at reversing eight years of sluggish wages growth.

“We have the opportunity to really fast-charge the Australian economy,” Mr Pickering told TND.

“We should take that opportunity.”

5. How much longer will the border be closed?

The government is expected to keep the international border closed until next year and is predicting a “phased” reopening at some stage in 2022.

That’s a longer wait than many had hoped, and that means all the associated headaches will be around a lot longer, too.

Net migration was negative last year and businesses across the country are struggling to find workers, with the tourism and higher education sectors struggling big time.

And so budget watchers will be on the lookout for any attempt to restart skilled migration, as well as for any reforms to seasonal worker programs to address major skills shortages.

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