Federal Budget 2021: jobs, infrastructure in for major boost

Summary

  • The government has minced no words in stating that it would be a ‘jobs budget’.
  • Infrastructure spending is likely to be increased
  • All eyes would be on healthcare cash splash

The Australian Federal Budget 2021-22 is likely to focus on job creation, as the federal government aims at further stimulating the recovery path.

With the government aiming to shrink the unemployment rate below-5% in the country, it comes as no surprise that both Prime Minister Scott Morrison and Federal Treasurer Josh Frydenberg have said that it will be a "jobs budget". The aim, according to them is to further boost the economic recovery which has already begun after the coronavirus-induced recession last year.

The Budget 2021-22 comes in the backdrop of employment being at 5.6% at the end of March 2021 – 60 basis point above the government’s comfort level.

Higher job creation leads to increased demand. The resultant increase in the consumption drives the economic growth using the multiplier effect.

According to the  International Monetary Fund (IMF), the Australian economy had contracted by 2.44% in 2020 as COVID-19 crippled the economies across the globe. The IMF, however, expects the economy to pull off a turnaround as the Australian GDP at constant prices is expected to grow by 4.54% in 2021.

In line with increased focus on job creation, the government is likely to give a push to labour intensive sectors such infrastructure. As a result of this the country might see more allocation towards infrastructure – which would mean multi-billion-dollar road and rail projects taking shape.

Also, the added fillip to the job-creation would have positive impact on retail sales, as consumption is likely to increase. Notably, the retail sales volume dipped in the March quarter, after a bumper December quarter.

Also Read: Australia Federal Budget 2021: Here are nine things to know

Another key area to watch out for are the healthcare announcements. In wake of the global pandemic, the government – like most other countries across the globe – is likely to crank up the spending in the healthcare segment. This will increase allocations towards health infra and health research.


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