Josh Frydenberg’s 2021-22 budget locks Australia deep into the red for years to come with large deficits and trillion dollar debt.

Talking Business May 14 2021



Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at

I am Leon Gettler. My job is to review and monitor      the week’s news in business, finance and economics. I bring it all to you, every week.

This is episode number 15 in our series for 2021 and today’s date is Friday May 14.

First,  I’ll be talking to Dr Sam Huppert, the CEO of Pro Medicus, the listed technology provider which helps large medical facilities store and transport large images. And then I’ll be talking to RMIT economist Sinclair Davidson about the Frydenberg Budget.

But now, let’s talk to Dr Sam Huppert.

More than $29 billion in temporary business and personal income tax cuts, a $33 billion boost for care services, and $4 billion more for training programs, are at the core of a budget that aims to create 250,000 jobs by the end of next year and drive the unemployment rate below 5%.The big single ticket item in the budget is a A$17.7 billion package to support the aged care sector after an official inquiry exposed shocking conditions in some institutions.. The budget, which may be the last before a federal election is called, forecasts a dramatic improvement in the budget bottom line, with cumulative deficits over the next four financial years $114 billion lower than predicted just five months ago. Josh Frydenberg’s 2021-22 budget locks Australia deep into the red for years to come with large deficits out for many years to come, fuelled by increased spending that will permanently enlarge the role of government in Australia. Frydenberg will run up a deficit of more than $100 billion next financial year, and a similar deficit the following year, despite the economy growing at over 4% and unemployment falling to 5% — all in the quest, he says, to push unemployment below where it was when the pandemic struck. Treasury’s forecasts anticipate that to happen in 2022-23, when unemployment will fall to 4.75% before heading to 4.5% after that. While that would represent the tightest labour market since before the financial crisis, it still will do little to fuel wages growth: the government sees the Wage Price Index (WPI) only reaching 2.75% by 2025. This means a real wage cut for Australian workers next year, and no real wages growth until 2025 when inflation will reach 2.5%. Australia’s net debt will rise to nearly one trillion dollars by 2025, despite the lower-than-forecast deficit this current financial year. Treasurer Josh Frydenberg’s 2021-22 big budget spend aligns both economic orthodoxy and the political needs of a government with an election due in a year. The deficit in the 12 months through June 2022 will be A$106.6 billion, or 5% of gross domestic product, exceeding economists’ A$80 billion estimate. That reflects higher outlays for infrastructure, aged care and tax breaks. Net debt is expected to be at 34.2% of GDP in June next year and peak just shy of A$1 trillion in June 2025, or 40.9% of GDP. That’s about half the U.S. and U.K. levels and about one-third of Japan’s, according to the Australian government. Yet the road to an election by next May is clouded by a sluggish vaccination rollout. The budget assumes overseas borders will remain closed until the middle of next year, suggesting Morrison will be campaigning for another term while the rollout is still unfolding.  Hopes of a return to international travel this year have been dashed in a document that contains a grim warning that normal flights won’t resume until mid-2022. Another year of hardship for tourism and education is reflected in the budget allocating A$2.1 billion in support for aviation, tourism, the arts and international education providers. Employers who’ve grown accustomed to being able to recruit workers from overseas are also starting to feel the pinch, with skill shortages developing. And those hoping the government would stump up for substantially more quarantine facilities to allow more people back into the country will also be disappointed. Among other key spending items in Frydenberg’s fiscal blueprint are:

  • A$7.8 billion to extend tax relief to low- and middle-income earning Australians
  • A$20.7 billion for the extension of a temporary program for expensing and loss carry-back for assets bought by firms that has already supported a rebound of machinery and equipment investment
  • A$15.2 billion in new commitments for road and railway projects across Australia
  • $17.7 billion for the employment-intensive aged care sector; and
  • A$1.9 billion for the Covid-19 vaccination strategy
  • An 81-page women’s budget statement — its third since 2018 — that includes $1.1bn for women’s safety, a $1.7bn investment in childcare and $350m for health and wellbeing measures.





Commonwealth Bank has reported cash profit for its third quarter of $2.4 billion on the back of surging lending to business. The number was almost double the third quarter last year and 24% higher than the average of its quarterly results in the first half.

A bidding war has broken out for Crown Resorts after Star Entertainment Group lobbed a highly conditional offer and Blackstone upped its bid for the embattled gambling giant, which appointed Steve McCann chief executive officer. The Star, which owns casinos in Sydney and Queensland, has lobbed an $8.5 billion nil premium merger proposal with a string of conditions. The proposal comes as Crown also entertains an $8 billion offer from US private equity investor Blackstone Group, which lobbed a new proposal over the weekend, raising its indicative proposal by 50c to $12.35 from $11.85. A third suitor, US investment fund Oaktree Capital, offered $3 billion to fund Crown’s buyback of Consolidated Press Holdings’ 37% stake in the company last month. The Star merger proposal, comes after the NSW regulator found Crown unfit to operate a casino at its Barrangaroo tower and the ASX-listed giant faces royal commissions into its casinos starting in West Australia on Monday and in Victoria next week. The Star proposal means the combined group would own six resorts, including flagship casinos in Sydney, Melbourne, Western Australia, Brisbane and the Gold Coast.

Woolworths will push on with its plans to separate out Endeavour Group, which includes Dan Murphy, Cellarmasters, BWS and Langton’s, saying it has determined a demerger into a new ASX-listed company is likely to enhance shareholder value over time and is preferable to other available options.

Global cosmetics brand Estee Lauder has highlighted a recent revival of make-up and skincare sales in Australia, particularly at bricks and mortar stores, to herald the beginning of a “make-up renaissance” as economies open up, vaccines are rolled out and consumers resume spending. Estee Lauder, which is one of the biggest beauty brand owners in the world, specifically mentioned Australia along with Israel and China as nation’s that were leading the globe in a rebound in sales with people going out more for either socialising or work and requiring replenished make-up supplies. Interestingly the uplift in consumer demand was most evident at bricks and mortar stores, not exclusively online, as in some jurisdictions where COVID-19 is under control such as Israel and Australia shoppers feel more comfortable visiting large shopping centres and malls.

Facebook will invest $15 million in regional Australian newsrooms as separate discussions for payment for journalism on the platform continues with Guardian Australia and Country Press Australia. The Silicon Valley giant is in discussions to partner with The Walkley Foundation to distribute the investment in the form of grants which aim to support smaller regional, rural and diverse newsrooms as they develop new products and strategies to expand reach and revenue. This initiative aims to build on past investment including Facebook’s $1.5 million Reader Revenue Accelerator which brought together 11 regional and smaller publishers with experts to develop subscription strategies and the Facebook Journalism Project COVID relief fund which provided $1 million in support of 17 Australian regional and community newsrooms financial impacted by the pandemic. The new investment is separate from deals Facebook is making with news publishers to pay for journalism to appear in a yet-to-be launched sections of the platform, called Facebook News, to be dedicated to quality news, It is understood Facebook is aiming to launch the section later this year. Last week Facebook signed a deal with Antony Catalano’s Australian Community Media, which publishes the Canberra Times and the Newcastle Herald, to pay for its journalism to appear on the platform. Facebook has also signed deals with Seven West Media, Nine Entertainment (owner of The Age, Sydney Morning Herald and Australian Financial Review), News Corp, and smaller publishers Solstice Media, Private Media and Schwartz Media.. Deals with a wide range of publishers will help the Silicon Valley giant avoid being included under the Morrison government’s news media bargaining code which became law at the end of February. No platform has yet been “designated” under the law designed to level the negotiating playing field between news publishers and tech giants.

Businesses are knocking back orders and competing with each other for workers and materials in an attempt to keep up with a furious economic comeback that has led to all-time highs in business confidence and conditions. More positive economic indicators, including a 1.3% surge in retail sales, stronger than expected employment figures and job ads in March and April, and a record $US200 iron ore price, have driven consumers and businesses to react rapidly to the domestic and global recovery. Another huge federal budget splurge on Tuesday with home-building incentives that have driven house prices up more than 10% in Sydney in the past five months is also encouraging business to invest and rehire. The NAB Business survey reported that profitability, trading, forward orders and hiring intentions have all soared back to records. Overall business conditions jumped 8 points to 32 index points in April, while confidence also set a new survey high, rising 9 points to 26 index points. The survey’s employment index, watched closely by the Reserve Bank, was up 7 points to 22 index points.

And that’s it for this week. And next week I’ll be talking to Brian Westfall from global consultancy firm Gartner about how Australians and Australian companies are adjusting to working from home. And I’ll be talking to economist Saul Eslake about the Budget.

In the meantime you can catch me on Facebook, Twitter and LinkedIn. And if you want leave a comment. Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.