We have summarised the key points from the 2021-2022 budget regarding the Australian Economy.

2021 Federal Budget - Economy Summary

The Australian economy has shown remarkable resilience in the face of the COVID‑19 pandemic with the economy rebounding at the fastest pace on record over the second half of 2020. The economy is now expected to exceed the pre-pandemic level of activity in early 2021, nine months earlier than expected in the 2020‑2021 Budget.

According to Treasury the Australian economy will grow by 1.25% in 2021 and rise by 4.25% in 2021-2022. The Government expects that there will be a decline of 2.25% for both the 2022-2023 and 2023-2024 financial years before growing in the 2024-2025 financial year by 2.5%

Almost one million jobs have been added to the economy since the worst of the crisis. There are now more Australians employed than ever before. The unemployment rate has fallen rapidly and is set to recover five times faster than the recovery from last recession in the 1990s, reducing the potential for longer‑term damage in the labour market and supporting growth in the medium term.

The unemployment rate grew to 6.9% in 2019-2020 which then declined to 5.5% in 2020-2021. The unemployment rate is expected to fall to 5% in mid‑2022 before falling further to 4¾ % in mid‑2023. The unemployment rate in Australia has only been sustained below 5 %$ once since the early 1970s and in this Budget, we are on a trajectory to do so again.

Over the next four years, the deficit will nearly halve as a stronger economy improves the bottom line. The underlying cash deficit in 2021‑2022 is forecast to be $106.6 billion (5.0 % of GDP). This is expected to improve over the forward estimates to a $57.0 billion deficit (2.4 % of GDP) in 2024‑2025 and to a deficit of 1.3 per cent of GDP by the end of the medium term. These deficits when compared to the deficits in the US budget of 14.7% of GDP in calendar 2020 and 13.9% of GDP in calendar 2021 are mild[1].

Compared to the 2020‑2021 Budget, the underlying cash deficit has improved by $52.7 billion in 2020‑2021. With improved anticipated budget deficits than the Australian recovery will have the ability to support bigger social programs in the years to come.

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If you have any questions or concerns about the proposals from the Federal budget announcements, please contact your Ulton Advisor to discuss.

Learn More

Want to learn more about the other announcements from the 2021 budget? We have broken the full budget down into 6 main categories for usability.

Individual_Summary   Business_Summary   Superannuation_Summary   Social_Security_Summary   Economy_Summary    Other Summary-1


Source

[1] Morgans, Equity research, May 11 2021, Written by Michael Knox, Economic Strategy The Australian comeback 

Australian Government, Budget 2021-22, Securing Australia's Recovery, https://budget.gov.au/2021-22/content/overview.htm

 

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