Expansionary budget provides more hits than misses

Expansionary budget provides more hits than misses
Expansionary budget provides more hits than misses

The government has looked past rising commodity prices, consumer spending, jobs growth and tax revenues to deliver an expansionary budget for a second year running.

CPA Australia General Manager External Affairs Dr Jane Rennie said, “After years of focusing on achieving budget surpluses, the government has recognised the importance of continuing to use fiscal policy levers. This is a sensible approach given ongoing COVID uncertainty and low wages growth.”

“The 2021-22 Federal Budget targets the historically underfunded areas of health care, aged care and women’s economic security. This investment will deliver enormous social and economic value, however, additional investment may be required.”

The budget commits $1.2 billion to transform Australia into a modern digital economy. Digital investment is vital to securing a sustainable economy and the list of key initiatives is worthwhile. However, there is a disconnect between the government’s digital ambitions and its implementation.

“The government’s aspirations for a digital economy are positive, but it has underestimated the size of the digital challenge confronting Australia’s small businesses and their capacity to overcome it.”

Jobs and unemployment

The government is targeting an unemployment rate with a four in front of it. Unsurprisingly, jobs growth is a focal point of the budget.

“As the economy is gathering pace, most of the jobs growth to achieve this target will occur organically. In this environment, public spending will play a secondary role to private sector hiring.”

The government is focusing on hard infrastructure to deliver its share of the jobs growth, adding to last budget’s record infrastructure spend with an additional $15 billion investment.

“There needs to be a balance between investment in hard infrastructure and the soft infrastructure needed to propel Australia’s transformation to a digital economy.”


The low and middle income tax offset (LMITO) and temporary full expensing have been extended. “Extending the LMITO effectively provides low and middle income earners with a pay rise at a time of low wages growth, while temporary full expensing continues to stimulate capital spending by business.”

The budget includes several measures to attract global talent and capital, including changes to employee share schemes and tax residency rules, the introduction of a patent box regime plus greater ATO support for foreign investors.

“These changes go some way to enhancing Australia’s attractiveness as a place to work and invest. In a globally competitive economy, the true test will be how they stack up against other jurisdictions.”

Australia’s digital games industry is targeted with a 30 per cent digital games tax off-set. “We suspect this incentive will do little to entice big tech to our shores. With the measure expected to cost only $18.8 million over four years, the next Fortnite won’t be coming out of Australia.”

Support for business

Of the $1.2 billion digital spend, over $500 million will go towards improving the government’s own digital capability. Only $28 million is allocated to help small and medium businesses digitalise.

“Investing in regtech without helping businesses digitalise is a bit like trying to turn half a light bulb on and keep the other half off. It won’t work, it’s short-sighted and really quite disappointing.”

$6.9 million is allocated to assist business to upgrade their cyber security. “Many Australian small businesses have low levels of cyber-security. This is an area where a bigger investment would be money well spent in supporting digitisation and contribute to a sustainable recovery.”

Women’s economic security

The budget includes $1.9 billion in measures to support women’s economic security, with $1.7 billion to improve childcare affordability.

“The government appears to have fallen short in its pledge to deliver a “female-friendly” budget. A bigger investment is needed to undo the impacts of years of economic gender inequality.”

“Affordable childcare is a significant barrier to women’s workforce participation and this investment will have a direct impact.”


The budget includes several changes to the superannuation system. The $450 minimum income threshold for the superannuation guarantee will be abolished. “We welcome this measure which will enable low-income earners to save for their retirement with every dollar they earn. This will improve economic security in retirement for women but it does little to address the underlying issue of wage inequality which drives the gender super gap.”

The maximum voluntary contributions which can be withdrawn under the First Home Super Saver Scheme will be increased from $30,000 to $50,000. “The existing scheme is poorly subscribed, and this token increase is unlikely to help more Australians purchase their first home.”

The work test for people aged between 67 and 74 who are seeking to top up their superannuation will be abolished. “Eliminating the work test makes good sense and will give people greater flexibility to move in and out of the workforce as they transition to full retirement.”

Aged care

The budget includes new funding of $17.7 billion over four years for the aged care sector.

“Additional funding is welcome, however, the new funding falls short of what many experts say is needed and is unlikely to address the root causes of the issues identified in the Royal Commission. It is essential these funds are used to improve care rather than boost providers’ bottom lines.

“Measures to increase the time nurses and carers are required to spend with residents and making an additional payment of $10 per resident per day are welcome.”


The government is relying heavily on technology to meet its international climate change commitments. Beyond this, there appears to be little attempt to embed environmental sustainability into the budget.

“Carbon capture and storage technologies won’t get Australia to net zero, the same way owning a carbon fibre bike doesn’t make you a cyclist. You need more than just tech savvy to achieve results.”

“Australia remains a nation in search of a coherent national environmental strategy, and this leaves the private sector to do the heavy lifting on emissions reduction.”

May 12, 2021