By Richard Gibbs | 1 Apr 2022

The 2022-23 Federal Budget progresses the Australian Government’s COVID-19 recovery strategy through measures to stimulate employment growth, supported by investment in infrastructure, skills, and regional economic development.

The Budget is framed in the context of a re-opening of the Australian economy in terms of net overseas migration, but still disrupted global supply chains and associated supply-side cost pressures. In this context, the 2022-23 Budget is framed with the key objectives:

  • creating more jobs and working towards an unemployment rate of 4%
  • maintaining record investments in health, education, women’s safety, and other essential services 
  • providing cost-of-living relief for households and supporting small business
  • investing in stronger defence, borders, and security 
  • investing in the roads, rail, dams, and renewable energy technology that will build Australia’s future.
Not surprisingly, for a pre-election budget, there is a sharp focus on issues of the moment, and little attention is paid to longer-term socio-economic and environmental challenges that ultimately must be addressed by the national government.
The measures announced in the 2022-23 Budget can best be seen as reactive responses to immediate socio-economic and environmental (natural disaster recovery) issues, and not as evidence-based proactive initiatives aimed at enhancing sustainability and resilience.

In the previous 2021-22 Budget, the Government set out a two-phase economic and fiscal strategy aimed at enabling the Australian government to return to its medium-term objectives of growing the economy at a rate aligned to stabilising and reducing debt.

Phase One – For at least 2021-22

  • Promote employment, growth, business, and consumer confidence through discretionary fiscal policy and the operation of automatic stabilisers.
  • Priority is to ensure a strong and sustained recovery to drive down the unemployment rate.

Phase Two – Likely from 2023-24 onwards

  • Transition to sustainable private sector-led growth, away from emergency government support programs.
  • Drive unemployment down to pre-pandemic levels or lower (i.e. below 5%).

The 2022-23 Budget is framed around the transition to the second phase of the economic and fiscal strategy, with the objective of achieving an unemployment rate below 4% and a lower-than-expected peak in gross debt to GDP of 44.9 per cent by 30 June 2025.


Net Overseas Migration (NOM) is significantly affected by international travel restrictions and global labour markets. The Government has significantly increased its migration estimates compared to the 2021-22 budget, as Australia and the world have opened to international travel. NOM is forecast to increase year on year as more migrants come to Australia. The homogeneous increase in population growth forecasts reflects this positive migration stance, as opposed to the hard border restrictions incorporated in the previous budget.

Changes to rules surrounding a range of visas and migration programs are intended to fuel the rebound in overseas migration. Work restrictions for Student and Working Holiday Maker visas have been relaxed, as well as incentives to bring forward their arrival to Australia. The 2021-22 Migration Program Skill Streaming will be lifted to 89,600 places.

The Migration Program Skills Stream cap will be further increased to 109,900 places in 2022-23. Caps to 11,000 places will lift Work and Holiday visas. Further openings of these migration and visa caps are likely to drive the 235,000 forecast NOM past 2024.

The assumptions underpinning the Migration Program indicate that the Government will reverse the 160,000-cap imposed under the National Population Strategy – lifting it back to the previous 190,000 level.
This would effectively truncate the ‘4-year hold’ that was originally announced as part of the COVID-19 recovery package. 
Population Growth   0.68 1.2 1.3 1.37 1.34
Net Overseas Migration -89,000 41,000 180,00 213,000 235,000 235,000
Change on Budget 20-21 6,700 118,400 84,100 11,900 0  
Assumptions    Total fertility rate is assumed to be 1.66 babies per woman     Total fertility rate falls to 1.65 babies per woman  

Key assumptions underpinning the economic forecasts include:

  • Community transmission of COVID-19 will continue.
  • Omicron wave will occur over the 2022 winter, which may see higher rates of absenteeism and pressure on supply chains
  • Public health measures, such as physical distancing, will be reimposed in a targeted way in response to future COVID-19 outbreaks, but are assumed not to affect the economic forecasts below.
  • International borders are assumed to remain open to migrants and fully vaccinated tourists, leading to positive net overseas migration and higher population growth.
  • Household consumption growth is assumed to remain strong.
  • Outbound tourism is assumed to be greater than inbound tourism.
  • Goods imports are assumed to grow faster than exports.
  • Unemployment is assumed to gradually return to the NAIRU over 2023-24.
Real GDP Growth (%) 1.5 4.25 3.5 2.5 2.5 2.5
Employment Growth (%) 6.5 2.75 1.5 1.5 1 1
Unemployment Rate (%) 5.1 4 3.75 3.75 3.75 4
Participation Rate (%) 66.2 66.5 66.5 66.5
Wage Price Index 1.7 2.75 3.25 3.25 3.5 3.5
Consumers Price Index 4.4 4.25 3 2.75 2.75 2.5
  • Halving the fuel excise tax from 44.2 cents per litre to 22.1 cents per litre for 6 months
  • A one-off $420 cost-of-living offset for workers eligible for the low- and middle-income tax offset
  • A $250 one-off payment to pensioners and other welfare recipients
  • An expected $6 billion to be spent on disaster relief and recovery because of the floods in Queensland and NSW
  • In addition, $1.2 billion will be spent to develop Australian-made satellites and enhance our space capability
  • Provision of an additional $6 billion of spending for the COVID-19 health response and preparation for the winter months.
  • From 1 January 2022 Telehealth was made a permanent part of Medicare
  • A further $547 million has been set aside for mental health services
  • Spending on aged care is to be increased further to $29.8 billion in 2022-23 – providing support for additional home care packages, extra daycare time for older Australians in residential care and new training places for aged care workers
  • Extra $3.7 billion in funding to states and territories for skills training in priority areas
  • Further $2.8 billion over five years to support apprenticeships
  • Provision of $2.2 billion to support the university and industry partnerships
  • Provision of $52.8 million to help build life and employment skills for disadvantaged young Australians (ReBoot)
  • An additional $17.9 billion has been committed to infrastructure, lifting the Federal Government’s 10-year infrastructure pipeline to A$120 billion. This comes on top of spending undertaken by state and territory governments.
  • Provision of $7.4 billion for new and expanded dam projects that increase water security
  • The deposit guarantee scheme will be more than doubled to 50,000 places per year. The scheme cuts the deposit required to buy a home to 5% with the Federal Government guaranteeing the other 15%
  • The First Home Super Saver Scheme, which allows first home buyers to save a deposit by contributing to super will be altered to allow $50,000 to be withdrawn, up from $30,000
  • Provision of $1.3 billion of spending towards ending domestic violence against women and children
  • There is $330.6 million set aside for health outcomes for women and girls
  • Provision of $482 million in funding to help women advance their careers
  • There is $18.5 million set aside to progress gender equality in the workplace and reduce the gender pay gap.
  • Provision of $10 billion for future naval infrastructure and $3.5 billion for up to 75 new tanks and armoured vehicles
  • Inclusion of $9.9 billion of investment in Australia’s intelligence and cyber capabilities

The 2022-23 Budget has a familiar pre-election tone and is focused on issues of the moment while being short on evidence-based proactive policy initiatives. The unexpectedly rapid rebound in economic activity following the COVID-19 shock has provided the Government with the opportunity to revise its unemployment targets and claim a fiscal dividend in terms of debt reduction. On the interest rate front, there is an implicit assumption that the Reserve Bank will continue its cautious approach when considering interest rate rises. The Government is highlighting the predominance of transitory supply-side cost pressures, which are currently driving pressures in cost-of-living for households. This clearly implies that monetary policy should look beyond this short-term disruption to supply chains and cost pressures.

In adopting a strategy based on propelling nominal GDP growth, the Government is re-visiting the reflation recovery playbook last employed in response to the global financial crisis. In the event, it fell short of its objective of stimulating recovery in income and demand. On this occasion, reflation will be critical to realising a meaningful reduction in Australia’s public debt burden, in the absence of large-scale asset sales.

In terms of the business cycle and operating conditions, the 2022-23 Budget is based on the assumption that supply-side cost pressures will continue over the remainder of the calendar year, and possibly beyond. The labour market will remain tight and highly competitive, consumer price pressures will continue to be concentrated in non-discretionary categories, leading to a further uplift in the retail price index (RPI).

A key risk to the development pipeline is the ongoing escalation in construction and project delivery costs (these are already afflicting major transport infrastructure projects).
Developers will also face a dilemma in the environment of still-low interest rates and escalating construction costs, and this may lead to deferral of projects given the prevailing low land holding costs (and potential uncertainty about future policy in terms of sustainability and resilience).