Treasurer Josh Frydenberg abandons surplus, budget repair strategy
In a major shift of fiscal policy, Treasurer Josh Frydenberg revealed the Morrison Government has dumped its budget repair strategy, giving up on surpluses. SEE WHAT THIS MEANS FOR YOU.
QLD Politics
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THE Morrison Government has officially abandoned its push for budget surpluses and eliminating debt, as Treasurer Josh Frydenberg confirmed there will be tax incentives in the budget, but slow wages growth and a smaller economy for years to come.
In a major shift, Mr Frydenberg announced in Canberra today said the COVID-19 recession was “unavoidable” and plans to repair the budget had been switched in favour of resuscitating the economy.
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Setting expectations ahead of the budget in less than a fortnight, Mr Frydenberg painted a grim picture of the nation’s financial position, but said there would not be higher taxes or cuts to services to pay it off.
Mr Frydenberg said they had dropped the strategy of chasing budget surpluses, reducing gross debt and eliminating net debt.
“It would now be damaging to the economy and unrealistic to target surpluses over the forward estimates – given what this would require us to do in terms of significant increases in taxes and large cuts to essential services,” he said.
“This would risk undermining the economic recovery we need to bring hundreds of thousands more Australians back to work and to underpin a stronger medium-term fiscal position.”
Instead a two-phase plan focused on “jobs and growth” would be used to rebuilt the shattered economy.
He said there would be “temporary, proportionate and targeted fiscal support, including through tax measures, to leverage private sector jobs and investment”.
The Treasurer said this would be in place until unemployment dropped back below 6 per cent.
“Once we are confident that the recovery has taken hold, we will move to Phase 2 of our revised fiscal strategy which is focused on restoring our fiscal position,” he said.
“If we lift taxes to chase lost revenue … it would be hurting the recovery.”
He said phase two would move away from the “temporary and targeted support”, include structural change and to begin rebuilding the budget buffers to prepare for future shocks.
“Let me be clear. The road to a stronger economy and building back our fiscal buffers is not through endless Government subsidies,” Mr Frydenberg said.
He said the Federal Government had committed more than $300 billion in fiscal support during COVID-19, compared to the $55 billion from state and territory governments, 98 per cent of which was confined to the next two years.
