Australia on track for historic unemployment milestone

The unemployment rate is expected to reach a figure seen only once in the past 50 years as Treasurer Josh Frydenberg gives a hint on tax cuts for low and middle income workers.

Businesses are embarking on a spending blitz to rival the mining boom a decade ago, in a major boost for Australia’s economic recovery which Josh Frydenberg says will put more people back to work.

Next week’s budget update will reveal the unemployment rate is expected to be locked below 5 per cent next year for only the second time in half a century.

In an interview with News Corp, the Treasurer said the tightening jobs market was “the quickest and most effective way of driving up wages”, although he would not confirm if the update contained a Christmas gift forecasting higher pay rises as inflation remained an issue.

Mr Frydenberg also indicated the government was leaning towards extending tax cuts worth $1000 to millions of low and middle income workers, as revealed by News Corp last month.

Asked if the government would take that promise to next year’s election, he said: “We’ve got a track record of lowering taxes. That’s what we’ve done at every opportunity.”

Australia’s unemployment rate is expected to be locked below 5 per cent next year.

But Mr Frydenberg said the third stage of the government’s tax plan — creating a 30 per cent rate for means everyone earning between $45,000 and $200,000 — would not be brought forward from 2024.

The budget update, to be released next Thursday, will show business investment increasing by 16 per cent over the next two years, compared to the 12 per cent forecast in May’s budget.

That would be the fastest rate of growth since the mining boom as total non-mining business investment soars to a record $200bn by 2023.

“The investment surge comes off the back of unprecedented tax incentives being provided by the Morrison government to create more jobs and to secure the economic recovery,” Mr Frydenberg said.

With the unemployment rate set to be sustained below 5 per cent next year, the government will move to the next stage of its budget repair strategy, and Mr Frydenberg declared restraining spending growth was a “core value”.

Asked if he could promise Australians would not see cuts to essential services after the election, Mr Frydenberg said the government’s track record had been to “increase funding for critical services while at the same time providing tax relief”.

While the cost of the National Disability Insurance Scheme has rapidly increased, he said the government was “absolutely committed to fully funding our social services programs”.

Mr Frydenberg said he would stay under the government’s budget tax speed limit, which means tax revenue cannot rise above 23.9 per cent of the size of the economy.