Treasurer Josh Frydenburg has outlined the government's focus for the upcoming federal budget. This comes amid a stronger-than-expected economic recovery following the COVID-19 pandemic.
The S&P/ASX All Ordinaries Index (ASX: XAO) is up 5% in 2021 and Australia's unemployment rate has fallen to 5.6%. This has led the IMF to upgrade its outlook for Australian economic growth to 4.5% this year. It also lists expected inflation at 1.7%.
The ABS data showed Australia's workforce participation rate increased to 66.3%, while overall employment increased to 13,077,600. Unemployment, which has long been a dragging force on wage growth, also decreased to 7.9%.
What to expect from the federal budget
The ramifications of finishing the government's JobKeeper wage subsidy scheme on 28 March are still to be seen. However, Australia's economic recovery has exceeded all expectations.
The Government is expected to use Australia's strong economic performance and record-low global interest rates to continue funding increases to skills acquisition and job creation programs.
It plans to lower taxes by over $50 billion over the forward estimates, including by $9 billion in 2020‑21 and $32 billion in 2021‑22. The government also recently extended its $4 billion JobMaker hiring credit program, as Australia's real GDP levels exceeded pre-pandemic levels.
Frydenberg also acknowledged increased funding for the aged care sector after a royal commission found extensive problems in access, transparency and training across the industry.
Frydenberg said on 3AW radio:
In this budget, we will have an emphasis on skills, on meeting the workforce shortages, age care is going to be a major feature as well
We are going to focus on the essential services that we can guarantee as well as maintain the wonderful momentum in the jobs market.
The federal budget is likely to be introduced next month.
ASX benefits from Australia's economic recovery
Some of the ASX's biggest companies have profited from favourable economic conditions. High iron-ore prices have been benefitting Australia's largest mining shares. Furthermore, the BHP Group Ltd (ASX: BHP) share price up 11.5% in 2021.
Meanwhile, a record housing boom has led to strong growth in banking shares. Big-four leading Westpac Banking Corp's (ASX: WBC) share price up by 30% in 2021 so far.
However, as the global economy is expected to enter a period of normalisation, the IMF expects Australia's real GDP growth to slow to 2.3% by 2023.
The S&P/ASX 200 Index (ASX: XJO) is falling by 25 points today but is up more than 5% in 2021.
