The weeks leading up to budget night are generally a triumph of spin over substance. On the morning after the budget night before, it pays to slow down, and examine the fine print.
Aged care: look a little deeper
A $17.7bn aged care package was the centrepiece of Tuesday night’s budget, and correctly so, given it was a comprehensive response to the damning findings of the aged care royal commission.
The government accepted a great number of the recommendations of that inquiry, perhaps more than might have been expected. However, it wasn’t all green lights. It is worth highlighting some of the thoughts that either hit the cutting room floor, or will be subject to further consideration.
The royal commission recommended a new dental program for pensioners and people in residential care, given the risks associated with poor oral health. That will be subject to “further consideration”. So will a mandatory minimum qualification for personal care workers. A clear recommendation that low wages in the sector be increased was “noted” rather than supported.
The government has accepted one of the most important recommendations from the inquiry – that elderly Australians be given a legislative right to experience decent care. But it has baulked (“further consideration”) at civil penalties and compensation for any contraventions. The commission also recommended abolishing user contributions for some services (“further consideration”), an overhaul of fees for respite care (“further consideration”), and phasing out refundable accommodation deposits (“further consideration”).
The government also binned the suggestion to pay for the costs of an ageing population with an aged care improvement levy. There are also a bunch of recommendations that have been “accepted in principle” rather than adopted outright. All this screams: watch this space during the implementation period. Closely.
Infrastructure: less forward sizzle, more fine print
The Morrison government adeptly generated much front-page coverage on the weekend before the budget about the eleventy billion dollars it plans to spend on roads, bridges and intermodal links.
This forward sizzle (I think it was $110bn this time) is a baked-in part of the Coalition’s budget ritual. But there’s a lot of fine print and footnotes accompanying the plans that aren’t revealed until budget night, and this year is no exception.
If you look at budget paper number one, on page 84, the second dot point on that page tells you payments in the government’s infrastructure program are expected to decrease (yes, that’s decrease, which is the opposite of increase) by $188.7m in 2020-21, and by $3.3bn over the forward estimates.
Why, you ask? According to the budget papers, the program needs to be realigned with the “delivery of project milestones”. In plain English, this means the effusive headlines are running well in advance of delivery. In question time on Wednesday, deputy prime minister Michael McCormack said the accounting reflects payment on delivery.
As well as delivery running behind announcements consistently, the government also has a tendency to commit funding over 10 years rather than four. Take Victoria, for example. The government says it will provide $3bn for priority projects, but the amount actually booked over the forward estimates is $397.7m.
The mystery of wages growth
We can deal with this quickly. Australia’s labour market (courtesy of massive fiscal support) proved more resilient during the pandemic than forecast. A big focus in the budget is driving the unemployment rate to below 5%, which of course would be excellent.
High school economics tells us wages rise when the unemployment rate falls, but Treasury isn’t so sure, given the Wage Price Index last year recorded the lowest quarterly growth on record. This is a stimulatory budget, but despite this, wages growth will remain “moderate”. The best Treasury can manage by way of forward-looking enthusiasm about the pay packets of Australians is wages “should” begin to pick up “towards the end of the forecast period”.
A behind-the-border migration program
This one’s a head-scratcher. The international border is closed right at the moment and the budget assumes it won’t reopen until some time next year. Net overseas migration is forecast to fall from 194,000 people in 2019-20 to be minus 97,000 people by the end of this financial year and minus 77,000 next year. But the budget also says the planning level for the migration program will be maintained at 160,000 places, with the humanitarian program maintained at 13,750 places in 2021-22.
I assumed this was an exemplar of a dodgy brothers budget assumption until I spoke to Henry Sherrell from the Grattan Institute, who has deep knowledge about Australia’s immigration program. Basically what’s happening is the government is attempting to fix a massive backlog in granting visas to partners of visa holders. Many of these people are already in the country.
“Partners are the single largest group of people already here,” Sherrell says. He also tells me there is a “bespoke way to get around the travel ban” with global talent and business investment visas, which are are still being processed. People can enter Australia on these visas if they can find a way to get here. We don’t know yet how many people are managing to do this during the pandemic.
Persisting with migration, and expanding slightly
Not many news outlets picked up this significant savings measure on the budget night, but the government will now require new migrants to Australia to wait four years before they can access government benefits. The waiting period will apply to people granted residency from 1 January 2022, affecting 13,200 future migrants and 45,000 families. The saving is booked at $671m. In a big spending budget, with an eye on an election, this presumably felt like low hanging fruit. But it is a strange thing to do, given where things stand.
Australia will need to attract new migrants to the country once the border reopens, and some elements of Tuesday night’s budget were set up to achieve that. But, then, this punitive measure.
Josh Frydenberg was asked about the policy rationale during his post-budget address at the National Press Club on Wednesday. Let’s just say politely it wasn’t his strongest answer. The treasurer said what the government was “seeking to do is to provide the support to those migrants in the same way that we have always have, but at the same time when it comes to net overseas migration, ensure that it rebuilds when it is safe to do so”. Hmm. Right.