Fri. Jun 18th, 2021

The scheme is available in addition to superannuation, not as an alternative, but its expansion in the budget and the resultant take-up will be viewed by the government before it decides whether to try and allow super to be used for a home, as is being demanded by some backbenchers.

The idea was not backed in pre-budget deliberations, partly because it would further overheat an already raging housing market.

The government will also add another 10,000 places to the First Home Loan Deposit Scheme, which enables eligible first home buyers to build or buy a new home with no more than a 5 per cent deposit, rather than the requisite 20 per cent.

The government, in partnership with small banks and non-bank lenders, underwrites the remainder of the lender’s mortgage insurance through its National Housing Finance and Investment Corporation.

While the government has changed its fiscal rules to keep spending to try to drive unemployment below 5 per cent, Mr Frydenberg said “we are not engaging in a spendathon”.

“We are absolutely focused on targeted support for the economy where it is needed, not undermining the structural integrity of the budget but capitalising on this historic opportunity to drive the unemployment rate lower,” he said.

He revealed the budget would include a “significant increase” to the government’s $100 billion, 10-year infrastructure plan and confirmed energy would also be an item.

There has been pre-budget speculation about the construction of a new gas-fired power station in NSW.

$10b aged care package

The biggest new spending item in the budget is likely to be well over $10 billion on aged care, which will include the creation of thousands more home-care packages, as well as a significant expansion of the aged care workforce.

The National Disability Insurance Scheme will cost $26 billion next year alone and require an extra $13.2 billion in funding over three years,

These changes will be structural, meaning the costs will be baked into the budget over the long term, and Mr Frydenberg said this would offset the savings that have been made by the faster-than-expected economic recovery.

Consequently, while the bottom line will be much better in the short term than previously forecast, there will be no speedy return to surplus.

Economy has snapped back

In the nine months to the end of March, the deficit was $133.3 billion, which was $29.5 billion lower than the $162.7 billion forecast when the budget was last updated in late December.

Mr Frydenberg said the gains from income tax receipts and lower welfare payments, due to the rapid rebound in jobs growth, would outstrip the revenue boom from iron ore, the price of which surpassed $US200 a tonne on Friday.

In its quarterly statement of monetary policy on Friday, the Reserve Bank of Australia said the economy had snapped back, a term the government abandoned at Easter last year when it feared the recovery would be long and slow.

“The broad-based nature of the upswing is in line with housing demand being supported by low interest rates, government support programs, a positive outlook for employment, potentially some pent-up demand during the pandemic and the increase in savings over 2020,” the RBA said.

The RBA painted an upbeat economic outlook, noting that households and businesses were “adjusting well” to the tapering of government stimulus.

“Household spending, dwelling investment and exports have all contributed to the snap-back in activity.”

Borders to stay shut until 2022

Mr Frydenberg said the task of the budget was to lock in these gains while insulating against the ongoing pandemic.

“More people are in jobs than they were pre-pandemic, with 200,000 more people in work than we thought in MYEFO.

“GDP is back to where it was nine months earlier than in MYEFO. And we’re coming back in terms of the unemployment rate to where we were pre-recession, five times faster than the 1990s.

“It’s just incredibly strong the recovery, but it’s not locked in yet, and that’s what we’re seeking to do in this budget.”

He confirmed international borders would remain largely closed to tourist and business travel until well into 2022 and net overseas migration would remain negative.

“The NOM has been negative and will continue to reflect the reality of the closed borders,” he said.

“You can only open the borders when it’s safe to do so. There is a great deal of uncertainty out there, international borders are closed, and will remain so for some time.”