Australian Federal Budget March 2022-23

Despite global disruption of business and supply chains and the advent of recent disasters, the Australian economy has generally bounced back strongly from the last two COVID dominated years, with record low unemployment levels and relatively low interest rates. However inflationary pressures risk eroding some of the recent economic gains, meaning the Government has a difficult task balancing stimulus measures to ease pressures on households, while still seeking to ensure longer term economic goals such as real wage growth can continue.

Budget deficits are now an accepted outcome of current Government fiscal policy and Government measures aimed at softening the impact of COVID through schemes such as JobKeeper, instant tax write-off concessions and extending the low and middle income tax offset, have supported consumer and business confidence over the longer period, with retail spending more recently being one of the highest on record. However, such measures need at some point to be wound back and the ‘magic’ tipping point which allows that to happen without hurting households is difficult to find, particularly when factors outside the Government’s control such as events in Europe can significantly impact the local economy. While the budget deficit has fallen, in part due to strong commodity prices and is forecast to fall further, constraints such as limited immigration will mean that finding the right skill base needed for longer term growth will be a continuing focus over the next few years. This will be especially so given the Governments 10 year infrastructure investment pipeline of over $120 billion and new Defence spending.

Australia remains a ‘lucky’ country in having a stable political environment, vast natural resources and low unemployment. The challenge for the Government will be capitalising on those advantages and being able to smooth short term issues while still ensuring long term prosperity.

All Budget 2022-23 documents are available to download from the Treasury's Budget 2022-23 website.