Budget 2021: Issues for Parliamentarians
To assist parliamentarians in their budgetary deliberations, this report highlights key issues arising from Budget 2021.
Communications
Quotes
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Based on our projection of the Government’s fiscal guardrails, almost all of the ground lost in the labour market due to the pandemic will be made up by the end of 2021-22. We maintain our judgement that stimulus spending in Budget 2021 could be mis-calibrated if the focus is solely on returning to pre-pandemic benchmarks.
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Budget 2021 estimates overstate the impact of stimulus spending over the next 3 years. Given the $69.2 billion in stimulus spending in Budget 2021, we estimate that the level of real GDP would be 1.0 % higher in 2022-23 and 2023-24. The level of employment would increase by 74,000 jobs in 2022-23 and by 94,000 in 2023-24.
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The Government has decided to effectively stabilize the federal debt ratio at a higher level, potentially exhausting its fiscal room over the medium- and long-term. This means that any substantial new permanent spending would either lead to a higher debt-to-GDP ratio or have to be financed through higher revenues and/or spending reductions in other areas.
Parliamentary Budget Officer