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Government’s economic update on the way to the Omicron COVID variant


The federal government will use today’s mid-year budget update to present the beginnings of a re-election speech focused on economic recovery, but it comes with warnings that the Omicron variant could wreak havoc on these plans.

Today’s figures include revised forecasts for job creation over the next four years, and suggestions that unemployment will drop to its lowest level since 2008.

The government expects the pressure on wages to increase steadily.

After the Prime Minister gave a speech earlier in the week to talk about an “economy ready for growth”, Treasurer Josh Frydenberg is now framing the recovery in very political terms.

“Labor has said repeatedly: ‘the biggest test of this government’s handling of the recession and its consequences will be what happens to jobs’, and ‘whether or not unemployment stays too high for too long’ “, did he declare.

“Only the Labor Party will be disappointed with the strong labor market outlook presented in MYEFO after years of denigration of the economy as Australia recovers from this once-in-a-century pandemic.”

But economists are warning that economic recovery depends on keeping the pandemic reasonably under control.

New South Wales on Wednesday recorded its highest number of daily cases in months, including more than two dozen Omicron cases, but continued to ease the restrictions.

Chris Richardson of Deloitte Access Economics said it was a fairly straightforward equation.

He said the Omicron variant has the potential to do a lot of damage if it turns out to be more severe than expected.

“If it is not benign, if Omicron or a subsequent mutation forces us to plunge back into long and long deadlocks, despite our vaccinations, then the economy is again in difficulty and the budget is in difficulty again”, he declared.

Opposition warns wage gains may not be enough

Labor expects the budget update to show the economy is recovering strongly, but says there is little room for complacency after previous turnovers ended in more lockdowns and a recession.

Shadow Treasurer Jim Chalmers said another concern was the rising cost of living alongside wages and the deteriorating situation for workers.

“We want to make sure that as the economy recovers, Australian working families are not absolutely crushed by the soaring cost of living as their real wages fall,” he said. .

“It’s not a real recovery if working Australian families come across this valley and all they face then is falling real wages and skyrocketing the cost of living.”

Job creation, wage increase on the horizon

Today’s update is expected to predict that by June 2025, 1 million more people will be working, an increase of 150,000 jobs that was forecast in this year’s budget.

Mr Morrison made a similar pledge ahead of the 2019 election, saying at the time that if the coalition was re-elected it would create 1.25 million jobs over five years.

The unemployment rate hit a six-month high in October at 5.2% as thousands re-entered the workforce to start looking for work before the closures eased.

But the Treasury predicts the unemployment rate will fall to 4.5% in the June quarter of next year and again to 4.25% in the June 2023 quarter.

When it comes to people’s take-home pay, the latest Treasury update also predicts that wages will increase every year for the next four years.

According to his modeling, on average a person working full time could see an increase of $ 2,500 per year until 2024-25.

The government also announced that it is injecting an additional $ 500 million into its National Housing Finance and Investment Corporation, which provides low-cost loans to organizations that provide community housing.

Prime Minister Scott Morrison said the additional funds would support 2,500 social housing units.

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James Glenday looks back on the main announcements of the 2021-2022 budget.

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