Treasurer Josh Frydenberg on Tuesday laid out the Morrison government’s budget that he said would offset the CCP virus recession and steer the country back to prosperity to secure its future.
Delivering the budget at Parliament House, Frydenberg noted that protecting Australia from the CCP (Chinese Communist Party) virus has seen the budget deficit grow to $213.7 billion this year. Net debt has also increased to $703 billion—or 36 percent of GDP—but is not expected to peak until June 2024 when current estimates put it at $966 billion—or 44 percent of GDP.
“This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time,” Frydenberg said, while also noting that Australia’s was more fortunate than other economies.
Current figures show that Australia’s net debt will peak at half of that currently expected for the UK and around a third of that expected for the United States.
To alleviate this, Frydenberg announced that the government would target the twin economic drivers of job creation and economic growth via a series of measures that centre on tax cuts, government stimulus for the manufacturing sector, regional Australia, and small and medium-sized business.
A chief focus will be younger Australians who are currently facing employment challenges not seen since the Great Depression.
“We owe it to the next generation to ensure a strong economy so that their lives are filled with the same opportunities and possibilities we have enjoyed,” Frydenberg said.
JobMaker: The Next Generation
Understanding that the younger generation is facing an upward economic battle the federal government announced in the budget a new JobMaker hiring credit to encourage businesses to employ younger Australians which they believe will support about 450,000 jobs.
“Having a job means more than earning an income. It means economic security. It means independence. It means opportunity. We can’t let this COVID recession take that away,” said Frydenberg.
The hiring credit will be payable for up to twelve months and available immediately to employers who hire those who are currently on JobSeeker between 16-35 years of age.
All businesses apart from the major banks will be eligible for the credit which will be paid at the rate of $200 per week for those aged under 30, and $100 per week for those aged between 30-35.
The hiring credit comes after Monday’s announcement of a $1.2 billion package that will create 100,000 new apprenticeships and traineeships, and a 50 percent wage subsidy for businesses that employ them.
Focusing on tax cuts, the Morrison government hopes that keeping its election promise of putting more cash into people pockets will generate billions of dollars worth of economic activity and an estimated 50,000 jobs.
To this end, Frydenberg said that 11 million Australians would receive a tax break after Stage Two legislated tax cuts were brought forward.
This means lower and middle-income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual-income families. More than 7 million Australians will receive tax relief of $2,000 or more this year. Additionally, the Morrison government will retain the low and middle-income tax offset for another year.
Stimulus For Businesses and Manufacturing
Frydenberg also targeted stimulus for businesses with turnovers of less than $5 billion, allowing them to write off any assets purchased from now until June 2022. Small and medium businesses will also be able to offset any losses made between now and June 2022 against profits made in the 2018-2019 financial year.
The Morrison government will also provide targeted stimulus through a $1.3 billion Modern Manufacturing plan for the food and beverage manufacturing industry, resources technology and critical minerals processing, medical products, recycling and clean energy, defence industry, and the space industry.
Response to the Budget
Responses to the budget have been varied. Deloitte, in its overall analysis, noted that while the budget is $29 billion worse than forecast in the July 2020 Economic and Fiscal Update, the fact that the debt costs only $17.3 billion in interest payments in 2022-23—less than the $19 billion paid in 2018-19—was an important takeaway.
“The defence of our lives and livelihoods is much cheaper than most realise,” said Deloitte, adding that Treasury has noted there will be a rapid recovery once a vaccine is fully in place in Australia.
But the Centre For Independent Studies argued on Wednesday that the Budget was” too focused on the short-term, too heavy on spending and too light on permanent structural reform.”