Spending the growth windfall to further grow the economy towards full employment
By Head of Investment Strategy and Economics and Chief Economist, AMP Capital Sydney, Australia
The 2021-22 Budget sees the Government ditch its plan to start budget repair (or austerity) once unemployment is “comfortably below 6%” in favour of continuing to focus on growing the economy to drive full employment and, in doing so, repair the budget that way. As a result, the Budget provides more stimulus and, thanks to the stronger economic recovery and high iron ore prices, is still able to report a declining deficit. This may seem like having your cake and eating it too – but it was also a feature of the budgets in the pre-GFC years and makes sense as reverting to austerity would delay the return to full employment and decent wages growth.