Federal Budget 2020 reveals Australia headed to record debt of almost $1 trillion
Billions of dollars in fast-tracked tax cuts and younger worker wage subsidies underline the Federal Government’s budget recovery pitch, as Australia’s recession sends debt and deficits to record levels.
Treasurer Josh Frydenberg’s coronavirus-delayed Budget includes $50 billion to bring forward tax cuts and $4 billion in subsidies for businesses to hire unemployed workers aged between 16 and 35.
The focus of the Budget is getting those who lost their jobs to COVID-19 back to work as Australia faces its biggest economic challenge since the Great Depression.
Cash payments worth $500, aimed at stimulating a struggling economy, will go to seniors, carers and disability support recipients, costing $2.6 billion, and an extra 23,000 in-home aged care packages will be offered, costing $1.6 billion.
The economic devastation sparked by coronavirus will see budget deficits continuing for at least another decade.
This financial year, the deficit is forecast to surpass $213 billion.
Gone is the Government’s pre-virus pledge to get the budget back to surplus and pay off the nation’s debt within a decade.
Now, the Government forecasts net debt will peak at $966 billion — the equivalent of 44 per cent of gross domestic product (GDP) — in 2024.
“This is a heavy burden but a necessary one to responsibly deal with the greatest challenge of our time,” Mr Frydenberg said.
Unemployment is forecast to be 7.25 per cent this financial year, down from a peak of 8 per cent in December.
Underlying the Government’s assumptions is that a coronavirus vaccine won’t be in place until late next year at the earliest.
It expects Australians will have to live with social-distancing until a vaccine is fully rolled out.
The Budget expects all domestic borders, except for WA’s, will reopen by the end of the year.
It expects WA’s to reopen in April, shortly after the state election there.
A return of international students and permanent migration isn’t forecast to happen until late next year, with international travel expected to “remain low through the latter part of 2021”.
If there is a vaccine before July next year, the Budget expects economic activity could increase by $34 billion.
But if there’s no vaccine and further outbreaks occur, forecasted economic activity will be $55 billion lower over the next two years.
The JobKeeper wage subsidy program is still slated to end in March next year, signalling a major end to direct Government economic assistance ramped up during the height of the pandemic.
The Government will also cut placements on its humanitarian program, saving almost a billion dollars in coming years.
The Budget also includes $6.4 billion in funding the Government has allocated but is yet to announce.
Wage subsidies and tax cuts
A so-called JobMaker Hiring Credit will be paid for a year to businesses who hire an unemployed worker aged 16 to 35 from the JobSeeker program.
The rate will be $200 a week for people under 30 and $100 a week for people between 30 and 35, and they must work at least 20 hours a week.
The Budget forecasts that will support 450,000 jobs and is eligible for all businesses except the major banks.
The next round of tax cuts, which are being brought forward two years ahead of schedule, will be retrospective to July, but people will have to wait until the end of the financial year to recoup the extra tax they have paid since the start of the financial year.
Millions of Australians will get a backdated tax cut that will mean they take home at least an extra $1,000 this year.
More than a billion dollars will be spent on new apprenticeships and traineeships for 100,000 people.
The Government will also expand an instant asset write off program, making it eligible for almost all businesses, costing more than $30 billion.
Extra health funding
The Government says it is committing more than $16 billion in COVID-19 health measures.
Government-subsidised mental health services will double from 10 to 20 and be available to all Australians — previously they were accessible only to Victorians.
The Treasurer said more mental health funding would be announced in the coming weeks.
The Budget also includes an additional $3.9 billion for the National Disability Insurance Scheme.
The Government has failed to include new measures for the residential aged care sector, which has seen the majority of coronavirus deaths in Australia, in this Budget.
It’s expected new funding measures will be announced when the aged care royal commission delivers its findings next year.
Billions for research, manufacturing and infrastructure
Ahead of the Budget, the Government announced billions of dollars for manufacturing and infrastructure projects.
Having faced criticisms for cutting research and development in early years, the Government will now allocate $2 billion in new incentives.
Universities will receive $1 billion in new research funding, and the CSIRO $459 million.
There’s also $14 billion to accelerate and fund new infrastructure programs.
A first home buyers deposit scheme will be expanded to include an extra 10,000 buyers.
The Government will also provide $1 billion in finance to support the construction of affordable housing.