/ 12 May 2021

Federal Budget v the pandemic

A comeback story for the ages is at the centre of the Morrison Government’s economic plan for Australia after the once-in-100-years pandemic put their plans of a surplus in the bin last year. Treasurer Josh Frydenberg last night said the budget deficit is set to come in at $161 billion this financial year. And Australia’s debt should peak at $980.6 billion at the end of the 2024-25 financial year. Things could have been worse, Frydenberg said, and the resilience of the Aussie economy puts us ahead of developed nations across Europe and Asia. “Team Australia at its best – a nation to be proud of,” he said.

Topline: there’s more than $29 billion in temporary business and personal income tax cuts, $33 billion in extra funding for services, and an additional $4 billion for training programs. There’s always winners and losers, but 3 call-outs:

• The scene-stealer is $17.7 billion for aged care in the wake of the Royal Commission that uncovered shocking levels of neglect. That includes $6.5 billion for an extra 80,000 home care packages to help more people stay in their homes. And there are subsidies for aged care providers to improve the quality of care and improved training for workers, amongst other things.

• That sounds big, but the whopper of the night is $20.7 billion to extend tax breaks to businesses to allow them to deduct the full cost of eligible capital assets until the end of 2022-23.

• And pointing to politics, there’s a tax cut for 10.2 million people through a $7.8 billion extension of the low and middle-income tax offset (aka LMITO), a rebate worth up to $1,080 for an individual. And as for women’s security, there’s $3.4 billion for domestic violence services, tackling sexual harassment at work, and making it more attractive for mothers to return to work.

Recovery, and an even more resilient economy, the government says. Add a dash of ‘we’re heading to an election in the next year’, and you get the gist of the scale of it… But analysts were quick to point out that it will only work if some ‘brave’ assumptions come off. Like international travel returning by mid-2022 and vaccinations being completed by the end of this year. We also need to hit economic growth of 4.25% next financial year – a rate we haven’t seen since the late 90s. And unemployment needs to hit 4.5% by 2023-24 by creating 250,000 new jobs to push wages up – a rate we haven’t seen for more than a decade. As Jimmy Barnes belted out, there are many rivers to cross…

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