Big spending Budget to create jobs

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The federal government has outlined a big spending budget, with almost $50 billion in tax relief for low- and middle-income earners, a record deficit this current financial year and new investment allowances for 99 per cent of Australian businesses.

It was a budget designed to kickstart the economy, and the government hopes to create 950,000 new jobs during the next four years.   

New measures announced on Tuesday night amount to almost $100 billion and the government is forecasting a budget deficit this financial year of $213.7 billion, before declining to $66.9 billion by 2023-24.

Treasurer Josh Frydenberg said the sharp increase in debt levels was a heavy burden, but necessary to deal with “the greatest responsibility of our time”. He positioned the Budget as a shift from defending the economy during the pandemic, to moving into a rebuilding phase.

The government has forecast the economy to contract by 3.75 per cent this calendar year, and 1.50 per cent this fiscal year. Unemployment is expected to peak at 8 per cent. During the 2022 fiscal year, Treasury forecasts economic growth of 4.75 per cent and a drop in the unemployment rate to 6.5 per cent by the June quarter of 2022.

Key economic parameters

Financial year 2021

Financial year 2022

Economic growth (%)

-1.5

+4.75

Unemployment rate (%)

7.25

6.50

Inflation rate (%)

1.75

1.50

Budget deficit ($b)

213.7

112.0

Mr Frydenberg said the economic and fiscal strategy set out a path to grow the economy, boost consumer and business confidence and create jobs. Once the recovery has taken hold and the unemployment rate is on its way back to pre-COVID-19 levels, the government will shift its focus to stabilising net debt.

Net debt will increase to $703 billion, or 36 per cent of gross domestic product this year, and peak at $966 billion in June 2024. Gross debt will hit $1.138 trillion by 2024.

The government said it would change legislation so that new super accounts will no longer be created every time a worker changes jobs. Instead, the employee will take their super account with them to their new job. The government said superannuation members were paying $450 million a year in unnecessary fees as a result of six million multiple accounts. The government will also establish an online comparison tool known as YourSuper.

Other major policy changes include:

  • bringing forward already legislated income tax cuts, to be backdated to 1 July 2020, that will benefit low and middle income earners
  • businesses with turnover of up to $5 billion will be able to write off the full value of eligible assets, effective immediately
  • a new JobMaker hiring credit, available for employers who employ people on JobSeeker aged between 16 and 35 years
  • an additional $1.2 billion to create 100,000 new apprenticeships and 50,000 places for higher education short courses in agriculture, health, IT, science and teaching
  • measures to support women in the workforce, first home buyers, more money for the national disability insurance scheme and the health sector, and extra payments to pensioners
  • money for infrastructure, cyber security and regional Australia
  • an extra $1.3 billion for the manufacturing sector and $1.9 billion to support low emissions and renewable technologies and
  • extra funding for the CSIRO and universities.

Mr Frydenberg said the road to recovery would be hard, but there was hope.

For more information about these measures, and others that may affect you, read Challenger’s full Federal Budget Report 2020-21.

Chris Plater is Challenger life chief executive and chief investment officer.

Challenger is a preferred partner of YourLifeChoices.

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Written by Chris Plater

5 Comments

Total Comments: 5
  1. 0
    0

    Josh Frydenberg what has happened to ‘help’ for the 35 and over population…Are they just to be ignored considering they are probably the range with the most experience. Are they to be cast aside by employers who can now employ 16-35 year olds and get financial incentives. That looks to me like a ‘kick in the teeth’…

  2. 0
    0

    This budget has, as Frydenberg suggested earlier, trying to build the economy from the supply side. This is often referred to as “trickle down economics”. It is beloved of people like Margaret Thatcher, who Frydenberg admires, but has been considered by a considerable majority of economists as not being nearly as effective as building the demand for goods and services.
    When the demand is there supply will naturally follow. Put money into peoples pockets will build demand as they, at least low and middle income earners, will spend that money.
    There has been too may lost opportunities with this budget with over 35s ignored as well as the elderly needing assistance to stay at home instead of moving into aged care facilities.

  3. 0
    0

    How does a free editorial by the chief executive of a ‘preferred partner of Your Life Choices’ merit being billed as ‘Finance specialist probes the details in a big spending Budget’. Where’s the probing? Reads like it was written by the Treasurer’s speechwriter.

  4. 0
    0

    It is a pity that this seems to be a budget that is not meant for women, folks over 35 or those earning under $60 000. An idea missed is to invest in child care (i.e. ‘sponsor a job’, so another person can then get a job- two jobs in one?). Then there is the blatant discrimination against the more recently unemployed older Australians. (Mind you, older in this case is over 35..!) Just wondering if this could be tested in any anti discrimination area by a legal firm or fifteen??


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