Budget 2022: Unemployment to reach 48-year low in September

The Coalition’s pre-election Budget has forecast unemployment to reach 3.75% in the September quarter of 2022, the lowest since 1974, signalling rising wages as the ticket out of inflation.

The Treasury’s Budget was expecting inflation to moderate from 4.25% in 2021-22 to 3% in 2022-23, normalising to 2.75% in 2023-24.

Pointing to a strong labour market with unemployment at 4% and the participation rate at a record high of 66.4%, the Budget forecasted wage growth to accelerate to its fastest pace in almost a decade.

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It forecasted the Wage Price Index to increase from 2.75% in 2021-22 to 3.25% in 2022-23, predicting average earnings per hour to increase by 5% through the year to the June quarter of 2022.

Acknowledging Australia had been affected by global inflationary pressures such as elevated oil prices and supply chain disruptions, the Budget stated that domestic inflationary pressures were more moderate than in other advanced economies.

In his Budget speech, Treasurer Josh Frydenberg said the deficit for 2022‑23 was expected to be $78 billion or 3.4% of GDP, halving as a proportion to GDP over the next three years.

“Net debt as a share of the economy will peak at 33.1% at 30 June, 2026, significantly lower than forecast last year.”

In his post-Budget interview with ABC’s Leigh Sales, Frydenberg was asked why he was confident on wage rises, noting they had been flat over the last 20 years.

In reply, Frydenberg said: “Employers will pay what they need to get the right workers.

“What we’ve encouraged in this Budget is more relief for small businesses with two particular measures to drive their adoption of digital technologies, to drive their skilling of their workforce.

“What we've got is more infrastructure programs to support growth, particularly in our regions, all of which is going to drive a stronger economy where businesses are not just more productive and competitive, but they're also more profitable.

“And that gives them the opportunity to take on workers, to pay them higher wages, especially when right now the biggest issue facing businesses is workforce shortages.”

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One thing that wasn't announced in the Budget is any change to the continued increases in compulsory super amounts employers have to pay. These may force total salary packages (including super) to increase, but with more of it having to go to super, workers take home pay will remain flat or even decrease.

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