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The secret of the budget? The big help is that we’re stuck in Australia

·4-min read
<span>Photograph: Sam Mooy/Getty Images</span>
Photograph: Sam Mooy/Getty Images

One of the weird aspects of this year’s budget is the government is actually very much counting on international borders to stay closed, and as a result keep us spending our money in Australia.

If this is an election budget, it sure is an odd one.

Sure as ever the government remained petty. Nothing for universities, which have been ravaged by not only the pandemic but the government’s ongoing diplomatic failures with China. Also, there was a slap at migrants by making them wait four years to be eligible for benefits.

Related: The six graphs you need to see to understand Australia’s back-to-the-future federal budget | Greg Jericho

But there was a lot more spending than targeted cuts and yet, despite this, the government still expects real wages growth to essentially be zero for the next four years:

Graph not displaying properly? Click here

We promise four years of no real wages growth – vote for us!

But then, when you have a government that uses the example of a family with a household income of $160,000 to represent those who will benefit from the extension of the low-middle income tax offset, you kind of get a sense of where their priorities lie.

It’s also a weird result given this budget very much relies on households to keep the economy going. But herein lies the secret of the budget: the big help is the fact we can’t go anywhere.

The next financial year is set to be a ripper: GDP growing at a stunning 4.25% – as good as anything we’ve seen this century. And yet it comes in a period in which the government also expects international borders to remain largely closed.

Graph not displaying properly? Click here

The rest of the world might remain either battling with the virus and its various new strains, or dealing with issues of vaccination, but no matter – our economy is going to soar (at least for one year).

And for that we can also thank those same closed borders, because the big driver of growth in 2021-22 is you and me and everyone else.

The government expects borders to remain closed throughout this year and into next, with it only suggesting that “international borders reopen and international tourism gradually returns over 2022”.

As a consequence we have an economy with growing employment, and despite no real wage growth we still have a lot of households with money to spend – but unable to go overseas.

As a result the government expects households will spend up big at home.

In the next financial year, household consumption is predicted to grow by 5.5%. That will be the biggest growth since 2003-04.

It is a good thing too, because dwelling investment is set to remain utterly flat, and overall business investment is predicted to rise just 1.5%:

Graph not displaying properly? Click here

Given seven of the past eight financial years has seen business investment fall, any growth is good growth, but the big GDP growth despite the lack of real power from business reveals just how massive is the expected consumption surge.

And what has been clear since the pandemic hit is that when people have jobs and are mostly confident about keeping that job they will spend:

Graph not displaying properly? Click here

The latest retail trade figures out this week showed we spent nearly 5% more volume on retail than we did in the first three months of last year.

And that growth takes into account the relative slowing of spending compared with what we did at the end of 2020.

The government also expect GST revenue to recover completely and rise an astonishing 16% this financial year:

Graph not displaying properly? Click here

With nowhere to go, and money to spend, we went mad spending on appliances and hardware and home goods – up 12% on the year. Even given the impact of restrictions on dining out, our amount spent in cafes, restaurants and on takeaway in March was higher than any previous month ever recorded:

Related: The complete 2021 Australian budget: choose what matters to you

Graph not displaying properly? Click here

And it is expected to continue. After the 5.5% jump in 2021-22, the following year sees a 4% increase.

The last time we had two consecutive years of household spending growing by more than 4%, wages were growing over 3.5% in nominal terms and real wages were going up by more than 1.5% each year.

The government predicts wages will not grow above 2.25% and real wages will actually fall.

So because we can’t go anywhere, and we have fortunately been spared the worst of the pandemic, the government expects – and very much hopes – we continue spending more than we usually do.