Federal Budget: Victorians set to benefit from tax cuts and cash bonuses
Low-income Victorians are set to receive an extra tax cut of $1080 as part of the budget’s spending blitz. But the plan to drag the country out of the coronavirus crisis hinges on some lofty assumptions.
News
Don't miss out on the headlines from News. Followed categories will be added to My News.
Tax cuts for low and middle income workers will be doubled immediately, putting an extra $1080 in their pockets as part of a $74bn spending blitz to fast-track Australia’s path out of the COVID-19 crisis.
Josh Frydenberg is aiming to create almost one million jobs with an ambitious budget that also includes $31bn worth of business tax perks and new incentives for employers to hire young people who are on the dole.
After the worst economic downturn since World War II, the budget predicts an extraordinary rebound next year, but only if Victoria is reopened by Christmas and a vaccine can be found.
The Treasurer’s cash bonanza comes at a huge cost, with a 2020/21 deficit of $213.7bn and Australia’s debt maxing out at $1.1 trillion — $42,800 in debt for every man, woman and child — in 2023/24.
“This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time,” Mr Frydenberg said on Tuesday night.
“There remains a monumental task ahead. But there is hope. Australia is up to the task.”
By fast-tracking tax cuts and delivering a one-off boost for workers earning up to $120,000, the government is aiming to pump $12.5bn into the economy and create 50,000 jobs.
More than 600,000 Victorian pensioners will also receive a $250 cash bonus before Christmas, plus another $250 in March.
Other highlights unveiled on Tuesday night include:
A MASSIVE expansion of aged care at home, with $1.6bn to cover 23,000 new places in the scheme.
A RESEARCH boom including $1bn for universities, $2b in research and development incentives and $459m for the CSIRO.
DOUBLING the number of Medicare-funded psychological services from 10 to 20 every year for Australians struggling with mental health problems.
NEW dams and pipelines in a $2bn plan to improve water infrastructure.
PRIVATE health insurance rule changes allowing kids to stay on their family policy until they are 31, up from 24.
USE it or lose it funding totalling $2bn for the states to carry out road safety upgrades.
SUPERANNUATION reforms to stop the creation of new accounts every time workers switch jobs, along with an online tool to compare funds.
A PACKAGE of $240m to help restore jobs lost by women during the pandemic.
On Wednesday, Mr Frydenberg will introduce an omnibus bill in parliament to cut income taxes, deliver business support measures and implement research and development incentives.
“We want this measure to be implemented as fast as possible … to get more money into peoples’ pockets that will help our economic recovery,” he said.
After months of speculation, the government decided against fast-tracking the third stage of its tax cuts plan, which is due to kick in from 2024 and will mean 95 per cent of workers face a marginal tax rate of no more than 30 per cent.
Its plan to accelerate stage two and boost support for low and middle income earners is expected to be waved through parliament within weeks.
“We will await the detail. But we, of course, will act consistently as we have,” Opposition Leader Anthony Albanese said on Tuesday morning.
Labor argues the third stage is irresponsible and unfairly benefits workers on big six-figure salaries, meaning it will loom as an issue again at the next election.
For businesses, new hiring credits worth up to $10,400 a year are available for taking on anyone on the JobSeeker unemployment benefit aged 16 to 35, which is expected to create a whopping 450,000 jobs.
Any company with an annual turnover below $5bn will also be able to write off assets they buy — such as new trucks for freight companies, harvesters for farms and production equipment for food businesses — until the middle of 2022.
Mr Frydenberg said it was a “game changer” for “the engine of the Australian economy”.
Along with tax reforms allowing businesses to offset their losses during the pandemic against prior profits, the Treasurer said it was “the largest set of incentives any Australian government has ever provided”.
“We are giving Australian businesses their best chance to succeed and keep more people in work,” he said.
The budget papers show the unemployment rate will peak at 8 per cent by Christmas.
But with the economy tipped to grow 4.25 per cent next year, unemployment would return to its pre-pandemic level by 2023/24.
The budget also included $1.1bn for new Victorian road and rail projects, a $1.5bn package of grants to kickstart manufacturing, $1.2bn to subsidise the wages of 100,000 tradies, and an extra 10,000 places in the first homebuyer loan deposit scheme.
Mr Frydenberg said the government’s direct interventions, combined with the expected growth of the economy, would create nearly one million jobs over the next four years.
The forecasts relied on all Australians being vaccinated against COVID-19 by the end of next year. If a vaccine came six months sooner, Mr Frydenberg said it would deliver a $34bn boost as international travel restarted and overseas students were able to return.
But if Victoria’s second wave was repeated, the economy could face a new $55bn blow.
“This crisis is primarily a health crisis which has created a very significant economic crisis,” Mr Frydenberg said.
“We are leaving no stone unturned to get access to the vaccine.”
Last year, the government promised to eliminate net debt by 2030. It is now expected to peak at $966bn — 44 per cent of the size of the economy — by 2024.
Finance Minister Mathias Cormann said the government had “no alternative”.
“By doing what we are doing in this budget, we are maximising the opportunity for every young Australian today and into the future,” he said.
“With interest rates where they are, it is actually more affordable than it has been for a long time.”
MORE NEWS
INSIDE THE PLAN TO GET VICTORIANS BACK TO WORK
HOW FIRST HOME BUYERS CAN SNAP UP THEIR DREAM PROPERTY FASTER