On Tuesday the Federal Treasurer Josh Frydenberg released the annual budget – a few months late because of the Covid-19 pandemic. In fact, it wasn’t just late because of Covid-19 it was shaped by it.
It’s been described as a ‘stimulus heavy’ budget.
This response was considered necessary because Australia’s economy has contracted by seven per cent in the June quarter. Australia has fared better than many other economies suffering the pandemic’s consequences. But as the treasurer said: “In the space of just one month, more than one million Australians lost their jobs or saw their working hours reduced to zero.”
Massive grunt has been put into Australian businesses, which it’s hoped will lift the whole economy and expand job opportunities for everyone, including those working in the public sector. As the treasurer explained: “eight out of every ten jobs in Australia are in the private sector. It is the engine of the Australian economy.”
The stock market has liked this budget – and that’s a good sign.
“The biggest post-Budget bounce for Australian stocks in 18 years suggests the smart money thinks Treasurer Josh Frydenberg is on the right track with his $98 billion tax cutting, investment promoting and job creating plan to kickstart the economy,” announced the Financial Review.
“Top corporate leaders have welcomed the federal government’s stimulus-heavy budget,” says the Daily Telegraph’. But it points out those leaders, such as National Australia Bank chief Ross McEwan, say businesses must use the stimulus to “step up and invest.” With these incentives, I’m optimistic that will happen.
It’s also been suggested that this budget gives a massive free kick to businesses who employ young people, and that this is at the expense of older workers. This is because of a new ‘job-maker’ tax break for those under the age of 35.
“That’s one trillion dollars of debt but millions of Australians left behind, including 928,000 people aged over 35 on unemployment benefits deliberately excluded from hiring subsidies. One trillion dollars of debt, a track record of no delivery and no plan for the future,” tweeted Shadow treasurer, Labor’s Jim Chalmers.
This is a tricky one because if the government had not boosted the youth economy it could just as easily face savage criticism, because it is recognised that if young people miss out on work opportunities they are at risk of remaining unemployed their whole lives.
Right at the top of the announcements was a tax cut, with more than 11 million taxpayers promised tax cuts backdated from July this year.
I believe tax cuts, which tend to be a feature of Coalition budgets, are a little gimmicky – often done for political purposes. But tax cuts this time make a lot of sense, and will hopefully improve consumer confidence, which has taken a battering. This is because those who haven’t lost their jobs have lost their sense of financial security, worried about the future with a dramatic and frightening new disease and struggling with difficult changes at work.
For many years the Coalition has been obsessed with gaining and holding on to budget surplus, equating this with responsible economic management, because they know it makes voters who don’t understand economic theory feel more secure. But for more than a century now it’s been recognised that a government investing in massive projects such as infrastructure, employment and business development can stimulate a much more important growth cycle because millions of extra people are working.
So I’m glad the Coalition has stopped beating that surplus drum, particularly now. Instead, we now have an economy that will go into nearly a trillion dollars into debt.
“COVID-19 will see our deficit reach $213.7 billion this year, falling to $66.9 billion by 2023-24. Net debt will increase to $703 billion or 36 per cent of GDP this year and peak at $966 billion or 44 per cent of GDP in June 2024,” the treasurer explained.
“This is a heavy burden but a necessary one to responsibly deal with the greatest challenge of our time,” Mr Frydenberg said.
Some commentators suggest this latest budget is not good for women. For example, Labor’s Senator Deborah O’Neill argues that it didn’t provide enough of a plan for childcare and women’s participation in the workforce. Demographer Dr Liz Allen, author of the book The Future of Us says it sent a signal that it wants women to stay at home and not compete for jobs.
However, the treasurer announced: “new cadetships and apprenticeships for women in science, technology, engineering and mathematics, job creation and entrepreneurialism, and women’s safety at work and at home.”
And in response to criticism about the impact on women, the Prime Minister replied: “Women pay tax. Women hire other Australians in their businesses…they want to get into traineeships. They want to get jobs.”
So we guess it’s a matter of perspective. Are you looking at women’s issues through the lens of more work for women or more childcare so they can work? Many female workers get tired of childcare being framed as a ‘women’s debate’. Childcare is a cost for families – yes some are headed by a solo woman. But all families are affected when childcare is too expensive.
I will watch this debate with interest.
Here are 10 good things I’ve identified in this budget, one in which, having already talked about ‘job keeper’ and ‘job seeker’ the government has now introduced the concept of the ‘job maker’. They are all taken from the budget statement made to the Federal Government on budget night.
- The JobMaker hiring credit will be payable for up to twelve months and immediately available to employers who hire those on JobSeeker aged 16-35. It will be paid at the rate of $200 per week for those aged under 30, and $100 per week for those aged between 30-35. New hires must work for at least 20 hours a week. All businesses, other than the major banks, will be eligible. Treasury estimates that this will support around 450,000 jobs for young people. An additional $1.2 billion will be spent to create 100,000 new apprenticeships and traineeships, with a 50 per cent wage subsidy for businesses who employ them.
- Expanding on its tax cuts, there’s also tax relief. “99 per cent of businesses will be able to write off the full value of any eligible asset they purchase for their business. This will be available for small, medium and larger businesses with a turnover of up to $5 billion until June 2022. Losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year.”
The government will also expand access to a range of small business tax concessions. To find out more about these, talk with your financial adviser or accountant.
It is hoped these two moves alone will encourage small businesses to hire people, since their business expenses will be dramatically cut and they’ll be able to use their savings to expand their business by hiring more staff.
- Substantial changes to superannuation have been made that I believe will be good for workers. Super will now automatically follow workers when they change jobs. Superannuation funds will be required to meet an annual performance test and funds will be required to notify their members of their underperformance. An online comparison tool known as ‘YourSuper’ will provide Australians with transparent information about fees and returns.
- A $1.3 billion Modern Manufacturing plan will target six national manufacturing priorities: food and beverage manufacturing, resources technology and critical minerals processing, medical products, recycling and clean energy, defence industry, and the space industry. $2 billion extra will go to additional Research and Development incentives
- $14 billion in new and accelerated infrastructure projects. Supporting recovery in the regions will include: $2 billion in concessional loans to help farmers overcome the devastating drought. $350 million to support regional tourism to attract domestic visitors back to the regions, a further round of the Building Better Regions Fund, and $317 million for Australian exporters to continue to access global supply chains.
I note that some commentators say some of these have already been announced and so are being ‘over-egged’. However, there is also $2 billion extra investment in road safety upgrades and $1 billion to support local councils immediate upgrades of local roads, footpaths and street lighting.
- An additional $1.8 billion in funding for the environment. The Morrison government is banning the export of plastic, paper, tyres and glass waste. In the words of the Prime Minister: ‘it’s our waste, it’s our responsibility’. $250 million to modernise our recycling infrastructure.
I note that many critics say the environmental initiatives do not go far enough and a considerably larger investment should have been made in the renewable energy industry.
- The First Home Loan Deposit Scheme will be expanded so that 10,000 more new home buyers can purchase their first homes with deposits as low as 5%. An additional $1billion will be spent on affordable housing.
I note that some commentators, such as Mission Australia, say this does not go far enough to meet the housing needs of many Australians.
- In a set of medical initiatives, an additional $3.9 billion has been assigned to the NDIS, and the number of Medicare funded psychological services through the Better Access Initiative, has been doubled from 10 to 20. A new drug, Lynparza, has been listed on the PBS for women suffering from ovarian cancer. This means instead of costing more than $140,000 per course, patients will now access the medicine at $6.60 per script for concession card holders and around $41 per script for general patients.
- Aged Pensioners will receive an additional $250 payment from December and a further $250 payment from March next year. There will be an increase of 23,000 additional home care packages, to help the elderly live independently at home, at a cost of $1.6 billion.
- $1.7 billion invested in our cyber-security/ $450 million is provided for our law enforcement and intelligence agencies
To read the full budget speech delivered by the treasurer, go to: