These shifts in budget strategy are welcome, but there are two reasons why they do not go far enough. First, the goal of 6 per cent unemployment is not bold enough, nor is it an indicator of the real state of the labour market. Second, addressing real challenges exposed by the pandemic requires a much wider set of social and environmental indicators.
Academics at the University of Sydney have come together with community, environment, union, business and investor groups to develop a new set of benchmarks for creating post-pandemic policy. Our benchmarks focus on whether such plans represent a “real deal” that is genuinely transformative, tackles inequality and insecurity, meets social and environmental goals, and is both participatory and collaborative. When applied to the budget, our benchmarks change the central question from “how big will the deficit be?” to “what will the budget do?”
The federal government is right to orient its budget towards the goal of reducing unemployment rather than returning to surplus. Australia is facing the biggest jobs crisis since the Great Depression. But a 6 per cent unemployment rate is too high. This would still leave about 800,000 Australians officially unemployed. Economists used to worry that reducing unemployment by too much would fuel inflation. This is not a concern in our current low inflation environment, where central banks around the world are aiming to increase inflation rates.
Official unemployment figures also disguise real unemployment in the best of times, let alone during a pandemic. This was shown by the August figures, which had unemployment declining despite the Melbourne lockdown. The combined unemployment and underemployment rate, or labour underutilisation rate, would be a much more real budget benchmark.
At present, the budget papers provide labour market figures as mere “forecasts”. This plays down the direct power that governments have over these numbers as employers, investors and policymakers. We should instead treat budget forecasts for the labour market as indicators of whether the government has a viable plan to create and guarantee well-paid and secure jobs across the suburbs and regions of Australia.
Many other important social and environmental indicators cannot be found in the budget papers. The pandemic exposed the dangers of inequalities created by precarious work, as well as our vulnerabilities to environmental shocks that will become more common with climate change. At present, there are no figures that measure the impact of the budget on things such as income inequality or greenhouse gas emissions. Alongside the unemployment rate, budget projections could also measure progress against Paris climate targets, or the share of income going to the highest earners. These and other social and environmental indicators must be included as real benchmarks for the budget.
Frydenberg has confirmed that the government will continue to stimulate the economy – as it must. But stimulus alone is not enough. Our real budget benchmarks make clear that not all stimulus is created equal. How the budget reshapes the economy is just as important as how much is spent. To address our real deficits in jobs, climate and equality, we need to develop a new kind of budget that is focused on who and what the budget is really for.
Dr Gareth Bryant is a senior lecturer with the Department of Political Economy at the University of Sydney, and an economist at the university’s Sydney Policy Lab.