What the budget delivers to the Illawarra

The flight to Canberra from Sydney said it all. Hardly anyone about the airport - so few flights on the boards that they didn't need to click over - and everyone wearing masks. This is COVID and the economic effects of the pandemic are everywhere.

This year's budget was bound to be a generous one. Apart from COVID, a looming election means this was a chance for the government to woo the electorate before we go to the polls.

And the budget did not disappoint. Lots of money being splashed around and debt racked up. The government's gross debt is expected to burst through the $1 trillion mark some time next year - that's almost 50 per cent of our gross national income or Gross Domestic Product (GDP).

But I am not so worried about the debt, as it's a far cry from the US and the UK whose economies are happily moving along with debt levels of more than 100 per cent of GDP.

So let's have a closer look at the budget.

First and foremost, let's focus on next year. The budget measures are always announced over a four-year horizon - and the numbers sound massive. While things can change dramatically over four years, what they say they are going to deliver over the next 12 months usually plays out.

The budget papers contained more than 150 measures over more than 200 pages, worth some $18 billion to the economy next year. But when all is said and done, there were only four sets of measures that were really significant, and these accounted for $13.3 billion next year or almost 75 per cent of the total new spend in the budget.

They were the tax cuts, support for unemployed, aged care measures and apprenticeship wage subsidies.

The tax cuts are pure stimulus - nothing more than an extension of one more year of the income tax offset that was announced last year. They will deliver a cool $1000 to low and middle income earners at the end of the financial year.

The second and fourth biggest items are double-edged. They are all targeting the unemployed and trying to prevent kids becoming unemployed. While this is good, they also signal a concern with unemployment in Australia.

The third biggest item was measures for aged care services. These are a response to the Royal Commission into the aged care services industry, and should see an improvement in services offered to the aged. Let's face it - we are all going there so this is good.

I was also surprised by what was missing. For example there were no new childcare measures for next year, although they will kick in the following year.

By my estimation, about $168.8 million will flow to the Illawarra next year as a result of the measures announced on Tuesday night.

Around $93 million be in tax cuts to many of the 164,600 workers in the Illawarra. Around $30 million will flow to some of the region's 10,100 unemployed. Many of the 53,000 people over 65 will benefit from improved services as I expect around $28 million will flow into the region to improve aged care services.

Finally, there are around 7000 15- and 16-year-olds in the region, and many can potentially benefit from the $17.5 million I expect to flow to the region in apprenticeship wage subsidies.

To the individual workers, aged, unemployed and young people, the budget will make a pretty big difference.

But in terms of economic stimulus to a fragile regional economy, I don't think so. Gross regional product in the local economy is around $22 billion. So $168.8 million that the budget measures are expected to bring to the local economy represents less than 1 percent. At this level, I don't expect it to make a huge difference to the level of economic activity in the region.

The budget papers did contain two of the biggest pledges I have ever seen for the region. Mount Ousley got a mention, with a $240 million pledge for an interchange. Jervis Bay also got a mention, with a cool $500 million pledged to upgrade the Princes Highway.

While this will create construction jobs in the future, we are going to have to wait until 2023 before we see any significant ramp up in spending on these projects.