Treasurer Josh Frydenberg’s Covid budget will reshape Australia – so buckle up for a wild economic ride. This budget is like no other.
We will be in a total deficit of around $281.4 – the highest deficit since World War II. Sounds scary, right? And it is.
One of our biggest problems is the lack migration. We’re having fewer babies and migrants account for 60% of Australia’s population growth.
That means we need less homes, have a smaller buying market and create less wealth. Not a good outcome.
Josh needs us to fill in the gaps with more spending and better productivity. Hard to do with growing unemployment and an understandable lack of confidence in the future.
In fact, we are saving as never before: the savings rate reached a 40-year high of 19 per cent, sending consumption down 12.1 per cent.
But Australia is a lot better off than many countries around the world. We’re not called the Lucky Country for nothing.
Here is what we know about the budget so far:
Backdated personal income tax cuts will mean workers have more money in their pockets and don’t have to wait for tax relief.
While speculation has centred on the Morrison Government “bringing forward” tax cuts, the more unorthodox approach of backdating means the relief can be offered in this financial year.
The tax cuts, worth $20 billion, were scheduled to come into force in 2022. A third stage of the tax cuts, with a tax rate of 32.5 per cent to apply to the vast majority of workers, is currently scheduled from 2024.
The personal income tax cuts for middle income earners are worth up to $2565-a-year for workers earning more than $120,000 and $1080 a year for anyone earning more than $50,000.
The idea is to give you money that you spend helping Australians keep their jobs. The tax cuts were scheduled for 2022. Now, they are to be brought forward.
If you earn under $18,200 you won’t see any changes from the anticipated tax changes.
- The 19 per cent tax rate threshold is expected to increase to $45,000, from $41,000.
- The 32.5 per cent tax threshold could see an increase to $120,000 from $90,000.
- The 37 per cent tax threshold could then be extended to include income earners earning over $120,000.
This means if you earn $40,000 would see an extra $8.75 a week in their pocket, or $455 a year while those earning $60,000 or $80,000 could expect $10.38 extra a week or $540 a year.
And Aussies earning $100,000 a year would find an extra $21.63 per week in their pay packet, or $1,125 a year.
First home buyers
The Government’s First Home Loan Deposit Scheme has been expanded by another 10,000 places, which means 10,000 more first-time home buyers can purchase a property with only a five per cent deposit. The other 15 per cent of the loan is guaranteed by the Government.
More homes can be built and that means more jobs.
The largesse will until June 30, 2021. You can join it to “homeBuilder” which gives Australians a $25,000 grant for renovations and new homes.
The government has also seen the light on price caps, raising them so Sydneysiders can purchase homes worth up to $950,000; $850,000 for Melbourne residents; $650,000 in Brisbane; and $550,000 in Perth.
Some 20,000 have benefitted so far. You need to earn under $125,000 for singles and $200,000 for couples combined.
Josh Frydenberg and Prime Minister Scott Morrison both says it’s all about jobs, jobs and jobs.
Briefing journalists, the Treasurer pointed out unemployment is at 6.8 per cent. Some 870,000 lost their jobs during the start-up phase of the pandemic, but 460,000 are now back at work.
Some 333,000 were aged 15 to 24. Young people are a particular.
The Government will pay half the wages of 100,000 apprentices or trainee workers to encourage businesses to make new hires from October 5, 2020 until the 100,000 places allocated are exhausted.
The $1.2 billion package is designed to try and help younger Australians and prevent future skill shortages.
“Whether it’s the manufacturing, housing and construction, arts or mining sectors – this new wage subsidy gives businesses certainty to hire and provides a career path to aspiring, young tradies,” said PM Scott Morrison.
Employers will be able to receive up to $7,000 per quarter, and is available until the 100,000 limit is reached.
Back in June, the government forecast Australia’s unemployment rate would swell to 9.25%. That forecast was upped to 10%, but Frydenberg says Tuesday’s budget will revise that back below 10%. I ask him for the number, but the treasurer isn’t yielding. “It will be above 6.8% and below 10%,” he says.
If you’re a pensioner
There will be some relief for Australians pensioners with Social Services Minister Anne Ruston revealing they would receive some sort of cash boost in the upcoming budget.
“Further support around our pensions is something that is contained in the budget,” Ms Ruston told the Sydney Morning Herald.
The Prime Minister also flagged further support for pensioners, revealing in August that the Treasurer had a plan to work through issues affecting older Australians.
Because of Covid, young people entering the labour force will get 8% less in their pay packets during their first year of earnings.
Young Australians might receive a cash boost.
The government announced the JobTrainer program in July, which is aimed at retraining people into different sectors.
The government unveiled a JobMaker Digital Plan earlier in September which the Prime Minister Scott Morrison said would help economic growth and jobs.
The plan includes a $1.67 billion investment in cybersecurity, a $4.5 billion investment in NBN and a further $800 million on a range of programs in infrastructure and security to help businesses progress into the digital world.
“The announcements we’re making today on accelerating our work in the fintech sector, consumer data rights, upgrading automated regulation compliance, the end of phone books full of forms, where things can be done online and digitally, remembering your previous answers so you don’t have to go through and fill out the forms later,” Mr Morrison said.
Businesses would get a digital identity that will allow them to have seamless interface with government and e-invoicing.
Mr Frydenberg also revealed that the changes would also mean that execution of documents would be able to be signed online.