‘Monumental task’: Josh Frydenberg banks on jobs, business stimulus as way out of the COVID-19 recession

Tax cuts will be delivered to 11.5 million workers within weeks in a $17.8 billion plan to jolt the economy out of recession using personal tax cuts, business investment incentives and a new subsidy for companies that hire the unemployed.

Workers will see the lower tax rates take effect on their pay packets by the middle of this month if the Senate approves the Morrison government plan to backdate the tax cuts to July 1.



Treasurer Josh Frydenberg warned of a "monumental" task to recover from the coronavirus crisis, as he revealed a spending surge and a revenue shock that will take the nation’s gross debt to $1.1 trillion within four years.

Employers will be offered a wage subsidy to recruit from the ranks of the unemployed in a $4 billion program that aims to support 450,000 jobs, filling a looming gap when the JobKeeper scheme ends next March.

The new JobMaker hiring credit will be worth $200 per week for every worker aged up to 30 and $100 per week for those aged from 30 to 35, payable for the next year for new hires who work at least 20 hours per week.

Labor attacked the age limit on the program for excluding 928,000 people who are aged over 35 and on unemployment benefits.

The government estimates the economy will recover 950,000 jobs over the next four years from a combination of budget measures and the recovery in the economy, based on the crucial assumption of a widespread COVID-19 vaccine next year.

Mr Frydenberg said he would put the tax cuts and other budget measures to Parliament on Wednesday to seek Labor support so the Australian Tax Office can apply the lower tax rates by the middle of this month.

"We’re absolutely focused on the low and middle income earners," Mr Frydenberg told The Sydney Morning Herald and The Age.

"We want these measures to be implemented as fast as possible."

Workers earning $100,000 will gain a tax cut worth $2445 a year compared to their tax bill in 2018 under the plan to bring forward the second stage of the government's tax overhaul, which was legislated last year but not meant to start until 2022.

Seeking to avoid a Senate fight on controversial changes, the government chose not to bring forward the third stage of its original tax plan, given criticism from Labor and the Greens that the changes due in 2024 deliver bigger benefits for those on higher incomes.

Workers on lower incomes will gain from an extension of the Low and Middle Income Tax Offset, which is worth up to $1080 a year, but it cannot be claimed until they lodge their tax returns after June 30.

But as well as the tax offset, workers earning between $45,000 and $90,000 will see cuts in their PAYG that will be worth $1080.

Aged pensioners will receive a $250 payment from December and another $250 from March.

Labor leader Anthony Albanese has signalled support for bringing forward the second stage of the tax cuts, suggesting a swift agreement in Parliament.

In the biggest single measure in the budget, companies will be given an instant tax break so they can write off the value of all investment by June 2022, available to all companies with annual turnover up to $5 billion.

The $26.7 billion tax break will be accompanied by a $4.9 billion loss carry-back scheme, as flagged by The Sydney Morning Herald and The Age last week, to allow companies to claim refunds or offsets on taxes in previous years.

In a policy turnaround on research and development, the government scrapped a plan from last year to save $1.8 billion in research and development tax concessions and will instead offer $2 billion in fresh incentives.

The mammoth outlay on spending measures and tax cuts will help drive the budget into a deficit of $213.7 billion this financial year, compared to the $6.1 billion surplus expected before the pandemic.

The astonishing turnaround is the result of $159.8 billion in policy decisions and almost $60 billion in parameter variations outside the government's control.

While the deficit is forecast to shrink to $112 billion next year, the Commonwealth will remain in deficit until beyond 2031.

Finance Minister Mathias Cormann said the government had "no alternative" but to unleash mammoth spending to prevent younger Australians facing years of economic pain.

Senator Cormann argued the policies were temporary and avoided long-term pressure on the budget, with payments falling back to only 1.7 per cent growth in real terms from 2021.

The government argues that 90 per cent of the emergency spending is limited to the next two years.

The outlook is founded on economic growth of 4.75 per cent in 2021-22 in the hope the world recovers from the pandemic, with a vaccination program in place for all Australians by the end of next year.

Economic growth would be one percentage point lower this year and next if a vaccine does not arrive on that timetable.

With millions of workers losing jobs or hours from shutdowns this year, the budget forecasts unemployment to reach 7.25 per cent this financial year before falling back to 6.5 per cent the subsequent year and 6 per cent in 2022-23.

In a central claim about the effectiveness of its policies, the government included Treasury estimates in the budget papers showing the unemployment rate would be five percentage points higher at its peak – that is, 12.25 per cent – without the federal economic support measures.

Get our Morning & Evening Edition newsletters

The most important news, analysis and insights delivered to your inbox at the start and end of each day. Sign up to The Sydney Morning Herald’s newsletter here, The Age’s newsletter here, Brisbane Times‘ here and WAtoday‘s here.

Most Viewed in Politics

Source: Read Full Article