When Josh Frydenberg arrived in his Canberra office on the Tuesday morning
after the Easter break, he had every reason for feeling cock-a-hoop. After
all the International Monetary Fund had just confirmed Australia’s economy
as the best performing in the developed world – and for good measure had
upgraded GDP growth forecast to 4.5 per cent in 2021.
But while the Treasurer talked up the Government’s economic credentials
during a subsequent media blitz, the fear within Coalition circles is that
all of this positive economic news is being drowned out by ongoing negative
coverage, particularly around the COVID-19 vaccine rollout.
“We are sinking in a sea of negativity,” is how one Ministerial adviser
puts it.
Less than five weeks before Mr Frydenberg unveils the May Budget, there’s
the rub. While Australia’s economy is the envy of the western world, the
Government is struggling to get any sort of cut-through. Think about this:
for the last two quarters, GDP growth has exceeded 3 per cent – the first
time in recorded history. Unemployment has dropped to 5.8 per cent, from a
revised 6.3 per cent in January and 867,000 jobs have been added in the
last nine months. The latest NAB survey showed business confidence at
positive 16 per cent – the highest in a decade. And the latest
Westpac-Melbourne Institute Consumer Sentiment Index revealed consumer
sentiment is 21.6 per cent higher than a year ago - and close to a ten-year
high.
All of which means the economy is powering ahead while business and
consumers are regaining much of the mojo they lost when the pandemic struck
a little over twelve months ago. No wonder senior Government figures in
Canberra are gnashing their collective teeth at the Government’s failure to
get traction on its core messaging. Instead the focus – rightly – is on the
significant problems with Australia’s vaccine rollout, highlighted by the
recent announcement that the AstraZeneca vaccine would be withdrawn for
Australians under the age of 50.
Forget the fact that Australia has out-performed most other countries when
it comes to managing the COVID-19 pandemic. The sound and fury from
sections of the media ensures the positive economic news is drowned in that
ocean of negativity.
All of which means the May 11 Budget shapes as a critically important
exercise in “resetting” the political agenda for the Morrison Government.
So, what to expect when the Treasurer addresses the House of
Representatives at 7.30pm on May 11? Well placed insiders say the
“headline” themes for the Budget have yet to be determined. Cabinet’s
Expenditure Review Committee – the so-called “Razor Gang” that goes through
every ministerial proposal line by fiscally-responsible line – is meeting
twice a week and this will intensify as we get closer to May 11.
Minister for Health Greg Hunt is preparing a big spending package on Aged
Care in response to the horrific findings of the Royal Commission into Aged
Care Quality and Safety. The Commonwealth spends a little over $21 billion
a year on aged care (according to the most recent figures available). That
figure will increase – and by a large amount – as the Government addresses
the chronic problems with the sector, highlighted by the year-long inquiry
into the nation’s aged care sector.
The aged care “industry” – which ranges from for-profit enterprises to the
major religious groups – is urging the Government to dramatically increase
recurrent spending, arguing Australia should be spending around $45 billion
per year to meet the OECD average. That is not going to happen, but the
Prime Minister and the astute Mr Hunt fully appreciate the need to address
long-standing problems with the sector. And, of course, Australia’s
demographic time bomb – the ageing of the population – is only going to
exacerbate this current mess. So we know the Budget will go heavy on aged
care.
What is less certain is what other measures will be announced on May 11. We
can expect the Government to address its “gender” issue with a big focus on
areas like women’s participation in the workforce. Senior Government
figures say the Budget will also include additional funding to combat
domestic violence.
Elsewhere the Budget will include a range of measures to assist Small- and
Medium-Sized enterprises including reforms designed to reduce the level of
paperwork faced by Australia’s army of small business operators.
After all small business remains a core constituency for the Coalition and
the Prime Minister will need their support if he wants to win another term
of office when the election is held, sometime in the first half of 2022.
The countdown is on.