Australia’s government unveiled fresh fiscal stimulus measures on Tuesday, pushing the budget deficit to a record level as the economy faces significant challenges from the once-in-a-century coronavirus pandemic.
“There is no economic recovery without a jobs recovery,” Treasurer Josh Frydenberg told lawmakers. “There is no budget recovery without a jobs recovery.”
The unemployment rate is expected to peak at around 8 percent in the December quarter. The jobless rate is seen at 7.25 percent in 2020-21 before falling gradually to 5.5 percent in 2023-24.
Real GDP is forecast to fall by 3.75 percent in 2020 before recovering in 2021 to grow by 4.25 percent.
According to the budget 2020-21, the underlying cash deficit will widen to A$213.7 billion, but decline to A$112 billion next year and to A$87.9 billion in 2022-23.
Net debt is shown to increase to A$703 billion or 36 percent of GDP this year, and peak at A$966 billion or 44 percent of GDP in June 2024.
“This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time,” Frydenberg said.
The treasurer brought forward the stage two income tax cuts to July 2020 from July 2022. More than 7 million Australians receive tax relief of A$2,000 or more this year.
To kick-start investment, Frydenberg announced an instant asset write off for businesses with a turnover of up to A$5 billion. Over 99 percent of businesses will be able to write off the full value of any eligible asset they purchase for their business.
The treasurer unveiled a new JobMaker hiring credit to encourage businesses to hire younger Australians. The hiring credit will be available immediately to employers who hire those on JobSeeker aged 16-35.
For increasing home ownership and support jobs in the construction industry, he announced assistance for first time home buyers.
An additional 10,000 first home buyers will be able to purchase a new home sooner under First Home Loan Deposit Scheme, he said.
The budget also includes second Women’s Economic Security Statement, with A$240 million in measures and programs.
Marcel Thieliant, an economist at Capital Economics, said the income tax cuts and other stimulus measures unveiled in today’s Budget are estimated to provide fiscal support of around 2.5 percent of GDP in 2021/22.
That won’t prevent a major tightening in fiscal policy as the huge support provided during the pandemic tapers off, the economist added.
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