Paying for the pandemic: Tax cuts to ease our long-term debt pain

The Federal Government is today set to deliver a big spending, jobs-focused Budget. But experts warn there is pain on the horizon with debt forecast to top $1 trillion.

Tax cuts are coming for everyday Australians, but a trillion dollar debt burden is all but unavoidable which will lead to consequences for future generations.

Treasurer Josh Frydenberg will hand down a big spending, jobs-focused Budget today as he seeks to lock in Australia’s recovery from the worst recession since the Great Depression.

The Courier-Mail understands the budget deficit is on track to fall to about $160 billion, well down on the $197 billion forecast in December.

But economists warn the trajectory towards $1 trillion debt will likely be reached within just a few years.

DON’T MISS OUR COMPREHENSIVE 16-PAGE FEDERAL BUDGET SPECIAL IN WEDNESDAY’S PRINT EDITION OF THE COURIER-MAIL AND IN THE DIGITAL PRINT EDITION FOR ONLINE SUBSCRIBERS

Treasurer Josh Frydenberg, pictured with Treasury Secretary Steven Kennedy, will hand down his third budget in Canberra today. Picture: NCA NewsWire / Gary Ramage

Job training for young people and long-term unemployed, to get them into work in areas of skill shortages, will likely form part of the centrepiece of this year’s budget, replacing the significantly under-subscribed JobMaker hiring credit.

Tax rebates of $1080 for people earning up to $90,000, to be claimed at tax time next July, are also expected.

There will be $18 billion for aged care services, $350 million for women’s health and more for domestic violence prevention, as the government seeks to recover from a series of scandals this year.

Record health spending and a mental health package is also set to be on the agenda in what the Treasurer has billed a “pandemic budget”.

Defence is also expected to get a budget boost, as the nation deals with the increased chance of conflict in the Indo-Pacific region.

Finance Minister Simon Birmingham gave an assurance to Australians that the budget “will deliver lower taxes”.

“We keep those tax burdens, and cost burdens on Australians as low as possible, while seeking to grow the economy,” he said.

While the budget is expected to assume international borders will reopen next year, Senator Birmingham said they would remain closed while the virus continued to pose a threat to health and the economy.

“We are going to maintain those sorts of tough border control settings until it’s clearly safe for us to do so,” he said.

Griffith economics professor Tony Makin, a former Howard-era Treasury economist, the “excessive” spending seen so far in the budget would be running up a debt that would carry consequences with it.

Job training for long-term unemployed and young people is expected to be a key part of Tuesday’s budget. Picture: William West / AFP

“On current settings we’re headed towards that eventuality of $1 trillion debt,” he said.

“The reason the budget deficit is looking better is that the revenue is much better than expected.

“The economy has sprung back so income tax revenue has come in and commodity prices have done well.

“But interest rates will can only go up and there will be a big debt servicing costs to deal with.”

Opposition treasury spokesman Jim Chalmers said the country could not afford a budget that was “another political patch and paint job”.

“This country needs to have something to show for the trillion dollars in debt that this Liberal-National Government has racked up,” Mr Chalmers said.

“In last year’s budget, delivered in October, the Government said 450,000 jobs would flow from the JobMaker scheme. The Treasurer had to admit it was more than 1,100 jobs.”