(Image: Private Media)

Josh Frydenberg’s 2021-22 budget locks Australia deep into the red for years to come with large deficits out to 2024-25, fuelled by increased spending that will permanently enlarge the role of government in Australia.

Frydenberg will run up a deficit of more than $100 billion next financial year, and a similar deficit the following year, despite the economy growing at over 4% and unemployment falling to 5% — all in the quest, he says, to push unemployment below where it was when the pandemic struck.

Treasury’s forecasts anticipate that to happen in 2022-23, when unemployment will fall to 4.75% before heading to 4.5% after that. While that would represent the tightest labour market since before the financial crisis, it still will do little to fuel wages growth: the government sees the Wage Price Index (WPI) only reaching 2.75% by 2025.