Federal Treasurer Josh Frydenberg has cast aside concerns for inflation and pressures for budget repair in his third pandemic budget and unveiled a short-term $8.6 billion support package for struggling Australian families, including an immediate halving of the fuel excise.
With an election expected to be called within days, a targeted cost of living package has been unveiled on Tuesday evening as the budget centrepiece, as well as multi-billion dollar spending measures targeting women's safety, parental leave, the regions and cyber preparedness.
"The budget has turned the corner. In this budget we are banking the dividend of a stronger recovery," the Treasurer told reporters in the budget lock-up.
Later when presenting the budget in the House of Representatives, Mr Frydenberg was more forthright in his re-election pitch.
"Despite the challenges, our economic recovery is leading the world," he told Parliament.
"This is not a time to change course. This is a time to stick to our plan. Only the Coalition can responsibly manage the budget and strengthen our nation's finances."
It is off the back of an improving economy, but the fiscal mountain to climb is considerable. The government has posted a revised deficit of $78 billion for this year, a $21.2 billion improvement since a $99.2 billion deficit was posted in the mid-year update last December.
That will continue a decade of deficits and debt that's set to peak at almost $864 billion in 2025. While a significant reduction, it remains an extraordinary figure for a government that came to power in 2013 campaigning against debt and deficit.
But with prices sky-rocketing particularly at the petrol pump, Mr Frydenberg said the government was aware families are doing it tough with higher fuel, food and shipping costs increasing inflation and stretching household budgets.
"Tonight the Morrison government announces a new temporary, targeted and responsible cost of living package to ease these pressures," Mr Frydenberg said. "Practical measures that will make a difference."
As has been teased in the lead up to the budget, the government will move to cut the fuel excise in half over the next six months from midnight Tuesday - a saving of 22 cents a litre and a cost of $3 billion to the budget. The cut is expected to flow over the next fortnight and the Australian Competition and Consumer Commission will monitor retailers to ensure the cut is passed on.
Ahead of its announcement, economists had been concerned such a cut was short term populism and would only add to inflationary pressures and raise pump prices further.
Mr Frydenberg insisted it will have downward pressure on inflation and brushed off a question that the excise cut was a "vote buying exercise."
"You have got Australian families who will think it is a good idea to pay less at the bowser. That's the key, " he said.
There's also tax relief for more than 10 million low-and-middle income earners with a new one-off $420 cost of living tax offset worth $41.1 billion. It is due to kick in after the election on July 1.
As well, there is a new one-off $250 cost of living payment due "within weeks" for more than 6 million Australians on income support, including pensioners, carers, veterans, job seekers, eligible self-funded retirees and concession card holders.
"Together, with existing indexation arrangements, this will see a single pensioner receive more than $500 in additional support over the next six months, just when they need it most," the Treasurer told Parliament.
There's more for tradies and small businesses and backing for Medicare and the NDIS, while the regions get a $10.7 billion package including money for new dams, a regional accelerator program for new investments and a regional telecommunications investment. The Treasurer would not confirm the package was a result of the Coalition deal to get the Nationals to support Net Zero by 2050, but said the regions were a "priority for the Coalition."
The pre-election budget also contains a significant expansion of the Paid Parental Scheme, allowing more families, including single parents, access to 20 weeks of parental leave. In the second women's budget statement of this term, there is also a $1.3 billion package tackling violence against women and children and a women's health package targeting stillbirth, miscarriage, endometriosis and cancer.
The overall health spend is shown in the budget papers to decline over the forward estimates, due to the end of some COVID-19 emergency responses, but the budget points to COVID still being a "risk to the outlook for some time."
Defence tech is getting a boost from the broader defence budget with a new 10-year $9.9 billion investment in Australia's offensive and defensive cyber capabilities, to be known as "Project REDSPICE."
The buoyant Australian economy - particularly the stronger than expected employment position but also higher iron ore and coal prices - will assist the Treasurer in the long task of budget repair. The forecast unemployment rate for the September quarter is 3.75 per cent, 3 percentage points below the budget forecast from the October 2020-21 budget.
Welfare payments are falling as a result and there has been "large upwards revisions" of income tax receipts.
Iron ore and coal prices are more than double the rates forecast last year. The budget papers show a conservative assumption that the iron ore spot price will decline from $US134 a tonne to US$55 a tonne by the September quarter, while the coal price will fall from US$320 a tonne to US$60 a tonne.
Iron ore and thermal coal are key drivers of budget receipts, but the Treasurer said he was not concerned as the "world is very uncertain right now."
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