Reaction to Federal Budget from a Talent perspective
Last night’s budget didn’t exactly blow the lights out but there are definitely some highlights for those of us in HR. There are also some things to keep a close eye on. My wrap up is below
Budget Overview
Real economic growth is forecasted at 2% in the next financial year and 2.25% in 2025-26, reflecting a gradual recovery trajectory. However, the employment landscape is expected to undergo some challenges, with employment growth slowing to just 0.75% in 2024-25 and a corresponding rise in the unemployment rate to 4.5%.
Despite this, there are rays of hope for job seekers as the budget introduces measures to support them, including changes to eligibility for the existing higher rate of JobSeeker payment and amendments to the participation limit for Carer Payment recipients.
The budget also introduces significant measures to support early childhood education, including funding towards a wage increase for early childhood educators and strengthening the payment and accuracy of the Child Care Subsidy program. These investments aim to address workforce challenges within the sector and improve access to quality childcare for families which should hopefully have a positive impact on workforce participation.
In addition to addressing unemployment and childcare, the budget forecasts moderate GDP growth, with real GDP expected to increase by 1.75% during the current financial year and gradually rise to 2.50% by 2026-27. These projections are heavily intertwined with the global economy though and this is uniquely complex right now.
Taxation reforms also feature prominently in the budget, with significant savings for individuals through Stage 3 tax cuts, averaging at $1,888 per year for the average taxpayer. Small businesses will benefit from the extension of the $20,000 instant asset write-off until 30 June 2025, providing much-needed support for investment and growth.
Despite the forecasted weakening of the labor market, the budget anticipates real wage increases, with real wages growth strengthening from around 0.5% in the early years to 1.0% in the outer years. This positive trend in real wage growth, combined with targeted investments in education, training, and childcare, aims to support household incomes and enhance economic resilience.
The budget reveals a significant increase in the Australian Public Service, with an additional 17,289 staff projected for the coming financial year.
While the budget presents a surplus and various initiatives to stimulate economic growth and support individuals and businesses, challenges such as rising unemployment and cost of living pressures remain areas of concern.
Key Takeaways for HR and TA
Cost-of-Living Relief: While measures like energy rebates and tax cuts aim to alleviate financial burdens, the lack of means-testing for these benefits raises concerns. HR teams should anticipate potential impacts on employee financial well-being and adjust support programs accordingly.
Economic uncertainty: With slower growth forecasted and a slight rise in unemployment expected, HR professionals must prepare for potential changes in the labor market. Strategies for talent acquisition, retention, and workforce planning may need adjustments to align with the evolving economic landscape.
Skills and Training: The significant investment in skills development, particularly in sectors like construction and clean energy, presents an opportunity for HR to collaborate with learning and development teams to identify skill gaps and implement training initiatives. Apprenticeship programs and fee-free TAFE courses offer avenues for upskilling and reskilling employees to meet future demands.
Job Creation: Investments in clean energy, critical minerals, and social housing infrastructure present promising avenues for job creation and workforce participation. Initiatives supporting job seekers from marginalised communities underscore the importance of diversity and inclusion in HR strategies.
Wage Increases: Planned boosts for aged care and childcare workers highlight the need for HR to review compensation structures and ensure pay equity.
Superannuation on Parental Leave: Paying superannuation on government-funded parental leave promotes financial security for families and women. HR teams should communicate these benefits effectively to employees and provide support in navigating parental leave policies.
Family and Domestic Violence Prevention: Investment in initiatives to end violence underscores the importance of workplace support for victims. HR professionals should collaborate with support programs to provide comprehensive assistance to affected employees.
Education Debt Relief: HECS debt relief and support for student placements offer opportunities for HR to attract and retain talent.
Mental Health Support: Investment in mental health services presents an opportunity for HR to prioritise well-being initiatives.
Small Business Support: HR professionals can leverage funds for industrial relations reforms and tax relief to enhance employee benefits. Investing in technology can help mitigate risks and ensure compliance.
Conclusion
While immediate cost-of-living relief measures are welcomed, there's a risk that they could contribute to inflationary pressures in the medium to long term, necessitating tighter monetary policy and potentially higher interest rates or at least slower rate cuts.
The success of the budget is contingent on external factors such as global economic conditions and geopolitical stability, highlighting the need for adaptability and resilience in any HR strategy.
HR and TA professionals must prepare for potential changes in the labour market. Strategies for talent acquisition, retention and workforce planning may need adjustments to align with the evolving economic landscape.
