Federal Budget 2020: Tax cuts and jobs key to economic recovery in historic budget

Around a million jobs will be created over the next four years and Australians could start to see a boost to their pay packet within weeks under a plan to supercharge economic recovery. Delivering the most significant fiscal balance sheet since World War II, Treasurer Josh Frydenberg will pin his hopes on 450,000 new jobs being created for young people under the age of 35 as part of an employer incentive designed to tackle Australia’s youth jobs crisis. Tax cuts worth up to $52 a week could hit the bank accounts of 11 million Australians by mid-October under a bring-forward of Stage 2 of tax incentives outlined in last year’s budget. The measure is estimated to create 50,000 jobs and will cost $12 billion this financial year alone. It will also include a low and middle income tax offset to be paid at tax return time that could be worth up to $2160 for dual income couples. The full suite of budget measures, including $1.2 billion for 100,000 apprentices, a $1.3 billion manufacturing strategy and 10,000 new first home deposit places, will create around a million jobs. On jobs for younger Australians the Hiring Credit will be available for young people who have been on welfare payments and will help young people access job opportunities and rebuild their connection to the workforce. The youth unemployment rate currently sits at 14.3 per cent nationally, 7.5 percentage points above the national jobless average. The spend-heavy budget will see Australia’s deficit blow out to $213.7 billion this financial year and will see net debt blow out to $703 billion – or 36 per cent of Gross Domestic Product. By 2024 it will blow out to 44 per cent of GDP at $966 billion. Of most concern is that the deficit is still expected to be $49.5 billion in ten years’ time, equivalent to 1.6 per cent of GDP. It will also take seven years to reduce the deficit from $66.9 billion, or 3 per cent of GDP, to the $49.5 billion figure. The figures are in stark contrast to Mr Frydenberg’s first Budget delivered before the federal election campaign in April last year where an $11 billion surplus was forecast for the 2020-21 financial year. Mr Frydenberg tonight however said the message was one of hope and the massive debt hole was necessary to generate jobs and prevent a bleak economic future. “There is hope. Australia is up to the task,” he said in his Budget speech to the House of Representatives. “The road to recovery will be hard – but there is hope. “Together Australia will come back. Together we will rebuild our economy and secure Australia’s future.” Mr Frydenberg also unveiled two $250 payments to pensioners, carers and veterans in a measure totalling $2.6 billion. Around 3.5 million businesses – more than 99 per cent of all Australian businesses - will also get access to a temporary full expensing of depreciable assets as long as they have a turnover of less than $5 billion. It will mean any assets purchased from 4.30pm WST last night and first used or installed by 30 June 2022 will be able to be written off completely, adding $200 billion of investment to the economy. A total of 23,000 new home care packages for the elderly will be created at a cost of $1.6 billion. And investment in mental health will be lifted to $5.7 billion this year with a $100.8 million expansion of the Medicare-funded psychology sessions. As called for by The West Australians the funded sessions will be doubled to 20. Lifeline, headspace, Beyond Blue and Kids Helpline will all also get additional funding. The Budget makes several key assumptions regarding the next year. It assumes a vaccine will be available and widely circulated by the end of next year, that Victoria will be back to normal by the end of this year and that the iron ore price will fall to $US55 a tonne by mid next year. This is a shift from the economic statement which forecast iron ore would fall to that price by the end of the December quarter but still defies the consistently high prices iron ore has fetched all of this year. The commodity was last trading at $US123 a tonne on Thursday and has been in a blackout since then due to a Chinese national holiday. In the Budget papers it estimates if iron ore prices remained high beyond the June quarter next year, before immediately falling to $US55 a tonne, nominal GDP could be $22.9 billion higher than forecast in 2020-21 and $2.9 billion higher in 2021-22. This would result in tax receipts of around $1.3 billion this year and due to the timing of company tax collections an increase in tax receipts of around $4.8 billion in 2021-22. Total mining investment will continue to be a bright spot The Petroleum Resources Rent Tax receipts have been revised down by $1 billion over the four years through to 2023-24, consistent with lower oil prices. GST receipts have been revised down $21.2 billion over the four years consistent with record falls in consumption of services. Mr Frydenberg said the Government was doing all it could to support the economy. “This crisis is a health crisis which has created a very significant economic crisis,” he said. “So we are leaving no stone unturned.” Finance Minister Mathias Cormann, who has helped to craft seven Federal Budgets and will retire at the end of the year said last night’s Budget was “not the fiscal position we expected to be reporting on”. “What we are presenting here today are budget estimates. They are not budget actuals they are based on the best available information today,” he said.