Treasurer Josh Frydenberg has delivered Australia’s first pandemic budget as the government faces a years-long “slow grind” recovery.
It was all about jobs when Treasurer Frydenberg delivered the budget on Tuesday night, with a slew of key measurers announced to boost employment as Australia weathers an economic storm like no other.
“In 2020, Australians have been tested like never before,” Mr Frydenberg said.
“Flood, fires, droughts, and a global pandemic. So many Australians, through no fault of their own, are doing it tough…our cherished way of life has been put on hold.”
Unemployment is now set to peak at 8 per cent, down from previous forecasts of 10 per cent – but direct support in the form of an expansion or extension of the JobKeeper and JobSeeker programs was not included in the budget. Instead, fast-tracked tax cuts worth almost $50 billion at the heart of the budget, with low- and middle-income workers a priority, as well as a massive instant asset write-off scheme – something that Mr Frydenberg called “a game changer”.
“It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs,” Mr Frydenberg said.
“Small businesses will buy, sell, deliver, install and maintain these assets. Every sector of our economy, every corner of our country, will benefit. And this is how Australians get back to work.”
Mr Frydenberg also revealed a JobMaker “hiring credit” that will provide businesses with subsidies to encourage them to hire unemployed young Australians at a cost of $4 billion, and plans to fast-track a host of infrastructure projects – with the government boosting its existing $100 billion spend by a further $10 billion.
Mr Frydenberg took the opportunity to praise the Morrison government’s now-abandoned focus on producing a budget deficit, saying that the massive amount of stimulus spending unleashed in the depths of the crisis was only possible due to the same fiscal responsibility that was once set to bring the budget back into black. That spending has now seen the deficit hit an enormous $213.7 billion in 2020, while net debt will also increase to $703 billion this year and peak at $966 billion – 44 per cent of GDP – in 2024.
“This is a heavy burden, but a necessary one to deal with the greatest challenge of our time,” Mr Frydenberg said, noting that net debt would peak at half the UK’s current debt load and a third of the US’, and that support would be wound back when unemployment was “comfortably on its way to pre-crisis levels”.
“We will then rebuild our fiscal buffers so we can be prepared for the next economic shock,” Mr Frydenberg said.
Reactions to the budget so far have been cautiously positive. While many in social services have questioned the government’s lack of interest in a permanent increase to the Newstart Allowance, business and finance commentators have welcomed the massive investment allowance and fast-tracked tax cuts.
“The Federal Government’s budget initiatives appear well designed in that they provide a timely near-term jolt to both household and corporate spending – rather than years’ later when the economy would have likely already recovered,” said BetaShares chief economist David Bassanese.
“That said, bringing forward significant stimulus is not without risk either, in that much of the deficit-financed spending might prove to have been unnecessary if the economy bounces back more quickly than expected. This is particularly so with the instant tax write-off for virtually all corporate capital spending over the coming year.”
The COVID crisis has revealed how central banks have amplified wealth inequality in recent years, according to Schroders, with its head of A...