$677bn Australia Federal Budget to pull Australia out of the downturn

Amidst a global pandemic and the nation’s first recession in 29 years, there was no doubt that the 2020/21 Federal Budget was going to be significant.

Anooj Oodit, Managing Director, APAC, comments on the Australia 2020/21 Federal Budget.

"As outlined by Treasurer, Josh Frydenberg in the budget speech, the Federal Government expects to spend 35 percent of gross domestic product (GDP), equating to $677bn to pull Australia out of the downturn.

In this downturn, interest rates have already dropped to 0.25 percent and the Reserve Bank of Australia has made it clear their reluctance to go to 0, placing the full responsibility of stimulating the economy on to the government. 

"In response to this, the 2020/21 Federal Budget includes a medley of tax cuts, wage subsidies, support stimulus and assumptions. A key takeaway from the budget is that the government is anticipating a COVID-19 vaccine to be available by the end of 2021 and that a recovery of 4.75 percent growth in GDP is forecast for FY2021/22.

"This year’s significant expenditure focuses on preventing a greater collapse, rather than providing a massive stimulus to increase growth.

"In terms of infrastructure construction, investment received a $14bn boost for new and fast-tracked infrastructure projects including the Perth METRONET – High Capacity Signalling and Morley Ellenbrook Line in Western Australia, the Newcastle Inner City Bypass between Rankin Park and Jesmond in New South Wales and the Shepparton Rail Line upgrade in Victoria. The infrastructure investment includes $7.5bn for road and rail projects, $2bn for road safety upgrades and $1bn for local councils to upgrade roads, footpaths and street lighting.

This year’s investment will increase the transport infrastructure pipeline from $100bn to $110bn over the next decade.

"Key highlights of the 2020/21 Federal Budget that will benefit the construction industry include:

  • $14bn boost to new and fast-tracked infrastructure projects including $7.5bn towards road and rail projects; $2bn towards road and safety upgrades; and $1bn towards local councils to upgrade roads, footpaths and street lighting.
  • $688m Home Builder Scheme, providing cash grants for people to renovate or build new homes.
  • Extension to the First Home Loan Deposit Scheme, providing an additional 10,000 places for first home buyers to build or buy new homes.
  • Businesses with a turnover of up to $5bn will be able to write off the full value of any eligible assets they purchase.
  • $1.3bn towards boosting manufacturing sectors including defence; space; medicine and medical products; food and beverages; resources and technology; and recycling and clean energy.

"Despite the significant spend in this year’s budget, the economic boost it will create is not comparable to that seen during the GFC.

"The size of the expenditure far outweighs the economic growth it will produce and this is a clear indicator of the size of the downturn our economy is in.

"A key risk to this budget is the stagnant population growth we are expecting to see while borders remain closed. Employment opportunities are driven by growth in the population and for the population to grow, migration is essential. However, given that this budget is made on some fairly robust assumptions, there is still the possibility that further stimulus could be provided if all doesn’t go to plan.  

"Investment in construction is indeed a fundamental lever being used to boost the economy. Delivering these capital projects efficiently, economically and effectively will be critical for Australia's Plc’s way out of these unprecedented conditions."

For further information contact:

Nikki Ward
Associate Director, Marketing and Business Development

t: +61 (0)2 8245 0000