Treasurer Rob Lucas says federal tax cuts may be needed to keep economy up after bushfires and coronavirus
Even after the dual crises of bushfires and coronavirus are eventually resolved, SA could face another problem of a slashed GST pool.
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South Australia’s $6.6 billion slice of the GST could be slashed if the double blow of coronavirus and bushfires bites into Australia’s Budget bottom line.
State Treasurer Rob Lucas has warned the Federal Government might need to bring forward billions of dollars worth of tax cuts to stimulate the economy.
It comes after his federal counterpart, Josh Frydenberg, this week wrote to the states and territories about the short-term financial impacts of the deadly coronavirus on international students and tourism.
“We are obviously concerned,” Mr Lucas said.
During the SARS virus outbreak in 2003, real GDP growth in Australia dropped by about 0.2 percentage points.
If the coronavirus had a similar effect, Mr Lucas said South Australia – which was counting on its forecast GST distribution of $6.6 billion in 2019-20 – would be hit hard.
“We accept however that the cost of the bushfires and any cost of the coronavirus are obviously greater priorities,” he said.
Stage two of the Federal Government’s tax cuts, which are set to start from 2022-23, are estimated to cost $47.6 billion, according to Parliamentary Budget Office figures.
Mr Lucas said the State Government would investigate what impact the virus would have on SA’s bottom line in the lead-up to his next Budget in June.
Mr Frydenberg said it was too early to tell what the full economic effect would be.
He said Australia and the Asia-Pacific region experienced “significant bounce-backs” once the SARS virus was contained.
The economic threat to Australia is set to be discussed at a Council on Federal Financial Relations meeting in April.
Reserve Bank governor Philip Lowe this week said the virus could present a temporary setback but building projects in bushfire-damaged areas would boost the economy in the second half of the year.
Federal Opposition treasury spokesman Jim Chalmers yesterday accused the Morrison Government of using the fires and coronavirus as an excuse for its economic failings.