Add Category
After a pretty wild two years, the government has offered another glimpse into how it thinks Australia will keep recovering from the pandemic – including facing the challenge of Omicron or any other variant that might come our way. Here's what we learned.
The Mid-Year Economic Fiscal Outlook, or MYEFO, was handed down today and is basically a way for the government to compare what it thought would happen with the economy in the May budget with what’s actually happening in real life
(And yes, even though we might be inching toward the end of the calendar year, we’re almost smack bang in the middle of the financial year, hence the mid-year update.)
It’s also an opportunity for the government to take a stab at predicting what life in Australia will look like for the next few years.
Here's what it thinks is going to happen.
Vaccines doing heavy lifting
Underpinning the financial predictions the government makes are their "key assumptions" on how things might play out in the years ahead.
Unsurprisingly, the government says COVID is still the biggest risk for our economic security, but it's hopeful about how things are going at the moment thanks to our high vaccine uptake.
For MYEFO, it's assumed that by the end of the year 90 per cent of people aged 16 and over will be fully vaccinated with two doses, which isn't too much of a stretch given we're at 89.7 per cent at the moment.
In line with the national reopening plan, there'll be no more lockdowns in areas where more than 80 per cent of people (again 16 and over) are vaccinated, and interstate travel will be back up and running by the beginning of 2022 as the last few areas drop border rules.
It hasn't ruled out that there might be "temporary strengthening of … restrictions" in areas that have low vaccination rates.
What about Omicron, you ask? Well, the government is assuming that it won't significantly change any reopening plans, but it's not ruling out something else down the line wreaking more havoc again.
Wage growth on the rise
First, the not-so-great news. The increase in the cost of living is expected to outpace the growth in real wages this financial year (so until June 2022).
But, it's better news after that. Wage growth is predicted to be 0.5 per cent above inflation in the 2022-23 financial year and then keep increasing every year.
One of the reasons for the optimism on the wage front is the improvement in the country's unemployment rate, which is now 4.6 per cent.
Treasury is forecasting that the unemployment rate keeps falling. It thinks it'll get to 4.25 per cent by next year, and stay that way till at least 2024-25.
The logic is that as unemployment keeps falling the demand for workers will increase and bosses will have to offer more competitive salaries to attract workers.
More migrants and tourists
When the budget was handed down in May, the government didn't think the international border would open until potentially the middle of 2022.
Given we're six months ahead of schedule, it's good news for the migration rate and international tourism.
But numbers won't bounce back overnight, with the government acknowledging that our gradual border relaxation is going to mean a slower recovery for some sectors, like universities, which rely on international students.
Overseas migration is still going to fall by 41,000 people this year but it should start to increase next financial year and keep recovering after that.
Debt and deficit not so grim
First a quick recap on what debt and deficit are:
- Debt is how much money in total Australia owes, and is cumulative over many years
- Deficit is how much money the government is spending compared to what it's earning through things like taxes. If it's spending more than it makes, that's a budget deficit. If it's making more than it's spending, it's a budget surplus
The government has shelled out hundreds of billions of dollars since the beginning of the pandemic and so we have had record deficits and are on track for record levels of debt.
But thanks to the progress the economy's made in the past few months, things are looking slightly better.
Our deficit for this financial year has improved by $7.4 billion to $99.2 billion, but the improvement is set to get smaller and smaller in the years ahead as government spending increases.
As for our debt, it's also been revised down by almost $66 billion and is no longer expected to hit almost $1 trillion. Instead, it's now forecast to peak at $914.8 billion in three years' time.
The government has previously flagged that there'll be a time to rein in spending and repair the budget, but given there's a federal election next year don't expect any spectacular tightening of belts anytime soon.
Loading form...