VC's update – Federal Budget 2021

Hello everyone

Last night the Federal Budget was announced in Parliament with some big signature spending commitments. Many people will feel the benefit of the announcements but I also know many of us are concerned that universities haven't been offered more support despite the challenges we face. Our sector has taken decades to build, and has contributed to the growth and prosperity for our nation - and we will continue to do so. Rest assured that I plan to keep our University stable, and I will carry on making the case that a world-class national university is an asset we cannot afford to lose.

Some of you may have read or heard me discussing the significant impact the border closures are having on our international students and universities. Many people in the Australian community, including business leaders, are worried about the impact of hundreds of thousands of people - and their talents - remaining offshore. We have developed plans to safely bring ANU students back to campus, and we are working with Territory and Federal Governments to implement them as soon as we receive a green light.

Understanding the detail of the Federal Budget takes time to digest, but with our campus being home to some of the world's best scholars, I've asked them to break down what it means for our community, and more broadly, what it means for Australia.

Professor Andrew Norton, Professor Sharon Friel and Professor Warwick McKibbin are sharing their expert opinions below - and keep an eye on the media for further analysis from our ANU academics.

Professor Andrew Norton on what the budget means for higher education

For higher education the 2021 Commonwealth Budget brought bad news. Hopes that the government would extend COVID-related assistance, most importantly an additional $1 billion in research funding and temporary extra student places, were dashed. Research infrastructure spending is expected to increase, but not in any major way until the 2023-24 financial year. 

 After the once-off surge in grants in 2021 the government returns to the total funding stasis policy that has been in place since 2017. Expenditure on the Commonwealth Grant Scheme, the main source of student funding, will be stable at around $7 billion per year. Spending on research block grants will be about $2 billion a year, and the Australian Research Council will receive $800 million. Only inflation indexation will produce increases.   

Strangely the Budget papers never mention cash flows through the HELP student loan scheme. Expected HELP lending, available from another source, is $6.5 billion for 2021. As CGS funding is stable, and international student revenue is in sharp decline, a spike in HELP lending due to higher student contributions under Job-ready Graduates could make HELP the largest single source of higher education revenue in 2022.   

For the next couple of years whether Australia's borders are open or closed matters more to universities than any of these government programs. Except for possible 'safe travel zones' on the New Zealand model no significant international arrivals are expected until mid-2022. Unfortunately for higher education that means things will get worse before they get better. 

Andrew Norton, Professor in the Practice of Higher Education Policy at the Centre for Social Research and Methods 
 

Professor Sharon Friel on what the budget means for social equity and wellbeing

Was this a wellbeing budget? Yesterday's big government Federal budget pronouncements in childcare, aged care, mental health, women's health, and domestic violence services will go a long way to keep people healthy and improve wellbeing. Was this an equitable wellbeing budget? Adequate spending on the conditions in which people are born, grow, live, work and age is essential if they are to have enough material resource and a sense of control over their lives to live in dignity and flourish. These matter for people's health, and they really matter for people lower down the social ladder. The poorest 20 per cent of the population can still expect to die younger compared to the richest 20 per cent of the population. Australians who are more socially disadvantaged and Indigenous Australians have a higher risk of depression, diabetes, heart disease and cancers. Our cities are marked by concentrations of long term unemployment, low levels of education, and poor housing conditions, leading to very poor physical and mental health outcomes.  

And so the budget targets to reduce unemployment and create jobs are welcome. The 1.5 million people currently out of work will need adequate income support in the meantime, and this was missing from the budget. Attention must be paid to the quality of jobs being created. Precarious employment (including temporary work and zero-hours contracts) is rife across the labour market and can be worse for mental health than no job at all. There was little to address the housing precariousness. Investment in social housing could help address the gap in housing, job creation, and reduce homelessness. Unless this is fixed, social and health inequities will continue to widen. The silence on real action to address climate change was deafening. This lack of action will undermine our wellbeing and exacerbate health inequities - did we not learn from the bushfires.  

Was this a wellbeing budget? For some. 

Sharon Friel, Professor of Health Equity and Director Menzies Centre for Health Governance, School of Regulation and Global Governance 
 

Professor Warwick McKibbin on what the budget means for our economy and COVID recovery

The Australian federal government budget should be focused on three broad goals. First, to tackle the covid-19 pandemic by maintaining income flows in the economy and encouraging investment in vaccine production and quarantine facilities. Maintaining economic activity and investing in reopening the economy are critical as the Australian economy recovers from the pandemic. Secondly, to reverse the decline in productivity growth that Australia has been experiencing over recent decades to create the conditions for strong economic growth in the future. Thirdly, to lay the groundwork to respond to the challenge of climate change, as the global community is likely to take serious action that has long-term implications for the Australian economy.   

The demand stimulus in the budget is significant. This stimulus is funded by increases in borrowing which is not necessarily a bad thing. Still, it does become problematic if borrowing is used to finance consumption rather than investment and if global interest rates rise. That part of the spending that focussed on infrastructure is positive as long as that spending is independently assessed as having a high economic return. However, most of that infrastructure should have been green infrastructure spending to support the adjustment away from fossil fuels to a low carbon economy.   

A key ingredient in productivity growth is an investment in human capital, which is achieved through funding university research. With the collapse of foreign student income, which was subsidizing university research, the university sector is vulnerable.  This problem was substantially ignored in the budget. University funding has been cut in nominal terms over the coming years.  

The world is likely to be taking significant action on climate change which will substantially impact Australia's fossil fuel exports and the future structure of the Australian economy. These external forces are more important than any particular domestic action on climate change but are ignored in the budget.  

This budget is a lost opportunity for enhancing innovation and productivity growth and addressing climate change. The budget relies on assumptions that hopefully will be proven correct. Still, if the premises are wrong, it leaves Australia vulnerable in a highly uncertain world. 

Warwick J. McKibbon, Professor and Director, ANU Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy 

Additional expert analysis

Professor Tony Dreise, Director of the Centre for Aboriginal Economic Policy Research

OPINION: Indigenous Affairs in Budget 2021 is the good, the bad, and the unknown. You can read the full article here: https://www.sbs.com.au/nitv/article/2021/05/13/opinion-indigenous-affairs-budget-2021-good-bad-and-unknown.

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I want to thank everyone for their resilience after the toughest year we've ever faced - it's an untraveled and long road ahead but we will get through it, as we have already, by supporting one another and continuing to play a crucial role for our nation.

Brian