03.11.2022Striving to overcome challenges: Federal Budget 2022
The Albanese government delivered its first budget on 25 October 2022, against a backdrop of economic, geopolitical and environmental challenges.
High inflation, rising interest rates, a global economic slowdown, continuing health challenges, a war in Ukraine and recent devastating flooding across much of Australia’s east coast make for hard and difficult decisions.
The government stated its intention is to avoid spending measures that might exacerbate inflation and to deliver on its election commitments. As such, the budget focused on cost-of-living support and measures to underpin the country’s economic productive capacity across energy, infrastructure, housing and skills investments. Health and aged care spending, childcare support and paid parental leave are also key areas of focus.
Net debt for FY 2022-23 is 23% of GDP and forecast to remain below 30% by 2025-26, which is lower than previously expected. There is a consensus that difficult times are ahead, including future budget challenges associated with the rising cost of the NDIS, managing an inflationary environment and cost-of-living challenges.
We comment below on some key issues that align to Committee for Melbourne’s (the Committee’s) agenda, including energy, housing, infrastructure and skills and education, and provide some links to further information, including analysis from some of our members.
The government announced a new Housing Accord with the state and territory governments to deliver 1 million new homes over the next five years. More detail is needed to understand this program and how these homes that are to be ‘well located’ will be delivered, predominantly by the private sector. The government has also directly committed $350 million for initiatives to help deliver 10,000 more social and affordable houses over five years from 2024.
The newly created Housing Australia Future Fund (which formed part of the government’s election commitments), also aims to build additional social and affordable homes. There were additional election commitments underpinned in the budget, such as Help to Buy Scheme, Regional First Home Buyer Guarantee and the National Housing Infrastructure Facility.
These new initiatives are welcome and come at a time when the economic benefit of investment in social and affordable housing has been made clear. Earlier this year, the Committee supported the Give Me Shelter report, compiled for Housing All Australians, by SGS Economics and Planning. The report shows that there is a significant benefit-cost ratio of 2:1 for investment in social and affordable housing.
The need for investment in affordable housing is clear. Low-income individuals and families are struggling to meet their day-to-day needs, homelessness is increasing and, in many cases, business owners are unable to attract staff in proximity due to a shortfall in housing stock. Failure to ensure enough affordable housing will weigh heavily on Melbourne’s capacity to attract and retain talent. The Committee’s Benchmarking Melbourne 2022 report highlights that Melbourne is the sixth most expensive housing market in the world, with COVID-19 further increasing the risk of homelessness.
There remains devil in the detail about how the private sector will help deliver the Housing Accord program. There does need to be a collective effort across government, business and the community if this is to be successful.
This budget realigned significant existing funding on infrastructure, to take account of new priorities. Amongst the more than $120 billion in infrastructure spending over the next 10 years, funding commitments for Victoria included:
· $5 billion: Melbourne Airport Rail Link
· $2.2 billion: Suburban Rail Loop East
· $447.7 million: Gippsland Rail Line upgrade
The Committee is pleased to also see a focus on digital infrastructure such as the $2.4 billion equity investment into the NBN Co to upgrade the National Broadband Network (NBN).
In the lead up to the Victorian State Election on 26 November, the Committee has called for the incoming Victorian Government to commit to a major reprioritisation of Melbourne’s infrastructure spend. In assessing the practical range of possible infrastructure projects that might be undertaken by the State Government, all government infrastructure expenditure should be reconsidered to help determine the most productive, effective and timely outcomes from the use of significant taxpayer dollars. Reviewing committed and planned projects, should ensure that the most productive future projects are prioritised and that they also take into account all economic infrastructure like social and affordable housing and digital connectivity. The Committee has suggested that Infrastructure Victoria is well-placed to undertake this task. Should there be any realignment of priorities in Victorian infrastructure spend, then the Federal Budget should account for this. In addition, the advice of Infrastructure Australia would be welcome in this regard.
The Committee has expressed support for a High Speed Rail Authority to consider plans for a high speed rail network between Brisbane and Melbourne.
The government has fast-tracked Australia’s low-carbon, clean energy future after committing $20 billion to fund the Rewiring the Nation Scheme to upgrade the country’s electricity grid and improve its connectivity with renewable energy sources.
This investment will help support the long-awaited Electric Vehicle (EV) revolution, which looks set to take off with tax cuts on EVs announced, along with investment in EV charging infrastructure.
Other investments include:
· $224 million: deploy 400 community batteries across Australia.
· $100 million: New Energy Apprenticeships and New Energy Skills programs.
· $90 million: Hydrogen Highways initiative.
· $63 million: Support SMEs in improving their energy efficiency and reducing energy use.
These commitments are good for Melbourne. Ambitious climate policy could help unleash Melbourne’s innovation capacity and create thousands of clean energy jobs, while renewed focus on transport decarbonisation will bring Melbourne closer to advancements being made in European and American cities. Urgency is now of the essence.
Skills and Education
After delivering the Jobs and Skills Summit upon entering office, the government’s strong focus on skills development, education and skilled migration was no surprise. Their commitments include:
· $486 million: 20,000 extra university places for disadvantaged students.
· $475 million: improve classroom and student wellbeing initiatives.
· $50 million: modernise TAFE facilities.
· $42 million: speed up visa processing, handle application backlog and foreign talent attraction.
· $12.9 million: establishment of the Jobs and Skills Australia agency.
More support to increase female and older Australians’ workforce participation has also been provided to help address the skills challenge.
These announcements are welcome news for Melbourne’s diverse sectors. With the skills crisis in this city exacerbated by the prolonged and intermittent lockdown periods endured during the pandemic, support to improve the skills and education of all Melburnians – from our youth to mid-career workers – is welcome, as are the steps taken to attract much needed foreign talent.
To read what some of our members are saying about the Federal Budget, see below:
· PWC – Federal Budget Insights FY22-23