Last week, Federal Treasurer Josh Frydenberg announced a “revised fiscal strategy” which will see the Coalition’s focus on achieving a budget surplus take a backseat and instead job generation will step into the spotlight as the government’s new key goal.
This means there will be no tax increases or austerity measures until unemployment is back under 6 per cent - latest ABS data saw a shock drop in the unemployment rate to 6.8 per cent in August, down from 7.5 per cent in July.
The Government’s July forecast showed the budget would reveal a total deficit of around $281.4 billion, which includes $85.8 billion for the 2019-20 financial year, and $184.5 billion for the 2020-21 financial year, in what will be the highest budget deficit since World War II.
Fast-tracked income tax changes would go some way to repair our economy by stimulating spending, but the federal government could need to do more to tackle the threat of surging unemployment.
Also read: Can we expect a Budget Day rate cut?
The revised fiscal strategy, designed to operate in two distinct phases, is expected to do just that.
The first phase of the revised fiscal strategy is focused sharply on boosting business and consumer confidence and promoting jobs and growth throughout the economy, Frydenberg said in his speech last Thursday.
“Our first priority must be to secure a strong and sustained economic recovery and drive the unemployment rate down as fast as possible,” he said.
The first phase of the new fiscal strategy will aim to do this in three key ways.
“First, we will continue to allow the automatic stabilisers to work freely to support the economy.”
“Second, we will continue to provide temporary, proportionate and targeted fiscal support, including through tax measures, to leverage private sector jobs and investment.
“Third, we will continue to push ahead with structural reforms that position the economy for the jobs of the future and which improve the ease of doing business,” Frydenberg said.
The first phase of the Strategy will remain in place until unemployment is on a clear path back to pre-crisis levels, comfortably under 6 per cent.
“Once we are confident that the recovery has taken hold, we will move to Phase 2 of our revised fiscal strategy which is focused on restoring our fiscal position,” he said.
Great, but what does all that mean?
The budget is expected to show that the government will pump money into boosting investment, demand, small businesses and job creation.
Removal of responsible lending obligations to help firms and individuals borrow more easily will also not only incentivise spending, but give businesses a better chance to grow and hire.
The Government is also planning on putting a tonne of cash behind infrastructure projects that can create jobs, Deputy Prime Minister Michael McCormack told the Sydney Morning Herald, saying it was likely one of the areas that would pull Australia out of the Covid-19 recession.
"Certainly through Covid-19, which has cost many people their jobs, infrastructure is going to be one of the saviours, along with the agriculture, resources and mining industries," he said.
McCormack flagged “significant” new spending on top of the existing $100 billion infrastructure pipeline.
Similarly, we should expect to see some mention of Energy and Emissions Reduction Minister Angus Taylor’s long-term plan which aims to reduce energy emissions by backing clean hydrogen, energy storage, low carbon steel and aluminium, carbon capture and soil carbon.
Taylor said the plan would support 130,000 jobs over the next decade, and reduce emissions by 250 million tonnes by 2040.
And what about unemployed Aussies?
The Treasurer hasn’t given much away yet, but he has flagged additional spending measures which are designed to get those people who are on unemployment benefits today into work.
The budget is expected to include new ‘JobMaker’ subsidies to encourage employers to take on new staff as the economy reopens.
But it is also expected to confirm that the JobKeeper wage subsidy will not be extended beyond 28 March next year.
The JobMaker plan is to enact a “new sense of common purpose” through advancing Australia’s vocation skills and industrial relations sector.
“Changing Australia’s skills and training system will be a JobMaker priority for national recovery, as we look to create jobs in a labour market undergoing major change,” Prime Minister Scott Morrison said.
“We need Australians better trained for the jobs businesses are looking to create.”
The JobMaker plan will see the government reform the vocational education training sector by carrying out Skills Organisation Pilots designed to help the industry have a greater say in the training system.
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