Frydenberg’s budget promise to slash unemployment rate

Repairing Australia’s budget will have to wait until the jobless rate is fixed, says the Treasurer ahead of the unveiling of his plan to get it done.

Unemployment will need to fall below pre-pandemic levels before the Federal Goverment’s razor gang looks at measures to repair the budget.

Treasurer Josh Frydenberg will unveil the bold target of driving the nation’s jobless rate below 5 per cent, while also promising there will not be any dramatic cuts in next month’s Budget.

“We won’t be undertaking any sharp pivots towards austerity,” he will say in a pre-Budget speech.

Mr Frydenberg will indicate unemployment is tipped to hit pre-pandemic levels in about two years, but the rate will “now need to have a four in front of it” for wages to rise, based on the Reserve Bank and Treasury’s estimates.

Australia’s unemployment rate hit 5.6 per cent in March, down from a peak of 7.5 per cent last July.

But South Australia’s jobless rate was the highest in the nation at 6.3 per cent.

PERTH, AUSTRALIA – NewsWire Photos April 22nd 2021: Treasurer, the Hon Josh Frydenberg MP during his visit to Caversham Wildlife Park, Perth, where he also had a press conference. Picture: NCA NewsWire /Philip Gostelow

Getting more Australians into jobs will be the government’s focus in the Budget as part of a strategy to boost the economy, drive up wages and pay down debt, the Treasurer will say.

Mr Frydenberg, pictured, will declare the country is still “firmly in the first phase” of its post-COVID economic strategy and isn’t ready for deeper budget-repair measures while international borders are still closed, the virus is still a threat, population growth is at its lowest in a century and unemployment is not yet “comfortably below 6 per cent”.

“We will not move to the second phase of our fiscal strategy until we are confident that we have secured the economic recovery,” Mr Frydenberg will say.

“We first want to drive the unemployment rate down to where it was prior to the pandemic and then even lower.

“And we want to see that sustained.”

Economic growth would “more than cover the cost of servicing our debt interest payments” while rates were at record lows, he will say.

Mr Frydenberg will highlight Australia’s economic recovery “is on track and ahead of schedule” with about 200,000 more people in jobs today than was expected four months ago.

That’s the equivalent of a “$5bn turnaround to the budget”, with $3bn less being paid out in income support and about $2bn worth of extra tax revenue.

The stronger-than-expected economic recovery has put the budget in a better place than last year and would help with the medium-term goal of “stabilising and reducing” debt over time.

“This again reinforces the point that the best way to repair the budget is to repair the economy,” Mr Frydenberg will say in his speech in Canberra.

He will also double down on the government’s decision to end the JobKeeper safety net, saying it “had to come to an end”.

“It was the right decision for the economy, for the labour market and for the Budget,” Mr Frydenberg will say.

“Despite many doomsday predictions of what JobKeeper’s end would mean for the economy, early data indicates the labour market has remained resilient and continued to strengthen.

“Over the fortnight to April 16, immediately following the conclusion of JobKeeper, the number of people on income support has actually fallen by approximately 46,000.”

The last time Australia had a jobless rate of below 5 per cent for a sustained period was between 2006 and 2008, just prior to the global financial crisis, and before that was in the early 1970s.