Federal Budget reaction: Economists welcome tax cuts, but migration forecast a concern
Despite the massive spending in Tuesday’s Federal Budget, one group says they have been “hung out to dry” by the government.
Self-funded retirees say they have been “hung out to dry” by the Morrison Government’s Budget.
“Retirees who partly or fully fund their own retirement have suffered significant income reductions as a result of the adverse economic impact COVID-19,” said Wayne Strandquist, President of the Association of Independent Retirees.
“These retirees rely on income from investments in the share market, property and fixed interest either through superannuation or private investment for their living expenses. They have been overlooked by the Government as billions of dollars have been allocated to programs to stimulate employment and the economy.”
Mr Strandquist said a large percentage of Australia’s $3 trillion superannuation pool was invested in companies, many of which were struggling to survive.
“The impact of companies paying reduced or nil dividends is causing considerable reductions in earnings for retirees,” he said.
“Retirees are not requesting special consideration but are seeking fairness in Government support along with the rest of the community while COVID-19 continues to seriously impact the economy.”
It comes after economists welcomed Tuesday night’s tax-cut Budget, but one industry group has pointed out a detail in it that should “concern” all Australians.
“There’s one thing in the Budget that should give us all pause to concern and that is the prediction that Australia’s net overseas migration is actually going to turn backwards and go negative, and our population growth is going to slow right down,” Australian Chamber of Commerce and Industry chief executive officer James Pearson said.
“That’s a problem because while we can boost productivity … and we can encourage participation, we need to have a growing population … if we’re going to underpin solid economic growth into the future.”
Despite this worry, Mr Pearson applauded the Budget measure that allows 99 per cent of businesses to deduct the total cost of eligible depreciable assets.
“The provision of a significant accelerated depreciation … will encourage businesses large and small to go out there and take risks. Make the plunge to buy capital equipment. They’ll buy that 3D printer; they’ll buy that new truck if they’re a tradie.”
LABOR SAYS BUDGET DOESN’T DO ENOUGH
Shadow treasurer Jim Chalmers says the Budget will rack up trillion of dollars in debt but does not do enough to create jobs.
“Despite producing a grab-bag of headline-seeking announcements, the Government expects another 160,000 Australians to be added to the jobless queues by Christmas,” Mr Chalmers said in a statement.
Labor criticised the government’s failure to lift the permanent JobSeeker rate above $40 per day, improve access to childcare, promote cleaner energy, or address the crisis in aged care.
“While the average worker will receive a $50 per fortnight tax cut, millions on JobKeeper have seen their payment cut by at least $300 per fortnight,” Mr Chalmers said.
“Decisions taken by the Liberals in this Budget mean that the Morrison Recession will be deeper and longer than necessary.”
‘RIGHT BUDGET AT THE RIGHT TIME’
The business community has hailed the Government for delivering “the right budget at the right time”.
The Business Council of Australia said the Budget’s measures, such as the instant asset write-off, would increase business investment and create jobs.
“By shifting from emergency support to targeted spending, the budget will help employers get back to business and get on with urgently creating the new jobs needed for the recovery,” chief executive Jennifer Westacott said.
“This investment incentive will create new purchase orders and jobs by encouraging businesses to immediately expand, innovate, update technology and buy new equipment.
She added the fast-tracked income tax cuts would increase demand in hard-hit sectors such as hospitality, retail and tourism.
BOOSTS FOR SENIORS ‘VERY WELCOME’
Boosts to the age pension announced in the Budget are “very welcome”, the peak group for Australian seniors says.
“Some very good news for older Australians in the Budget: two lots of stimulus supplements for the age pension $250 in December and $250 next March,” Council on the Ageing chief executive Ian Yates said. “We’re very pleased … with 23,000 new home care packages to provide Australians with better care and more care at home. It’s not sufficient to bring the waiting list down to 30 days, but it’s a very big first step.”
BUDGET’S ‘DEEPLY DISAPPOINTING’ FAILURE
A peak seniors group says it is “deeply disappointed” after the Budget failed to address the problem at the heart of the aged care system.
“The Royal Commission heard that 30,000 people either died waiting for a package or going into aged care unnecessarily because they couldn’t be kept in their home. So this is really not addressing the problem,” National Seniors Australia chief advocate Ian Henschke said.
Mr Henschke said he hoped the next budget would fix the problem, especially the issue of ballooning home care waiting lists.
“There are 100,000 Australians waiting for home care and the government has provided 23,000 places over four years, so it’s barely addressing the need … I’m deeply disappointed.”
PRAISE FOR ‘FORWARD-LOOKING’ BUDGET
A peak Australian industry group has welcomed the stimulus in the Budget, saying it is “a Budget that is right for the times: stimulatory, inclusive, confidence-building and forward-looking”.
Ai Group chief executive Innes Willox said the Budget would help to counteract the decline in gross domestic product brought on by the lack of immigration, which traditionally plays a critical role in Australia’s economy.
“In the face of these forces, the large boost to household incomes from the bring forward of personal income tax cuts; the additional direct payments to households and the large commitments to infrastructure spending will stimulate aggregate demand and fuel the recovery,” he said.
WHY THE TAX CUTS ARE A GAME-CHANGER
Fast-tracked income tax cuts included in the Federal Budget will alleviate pressures upon households and businesses, the Commonwealth Bank says.
The major bank has been advocating for the cuts to be fast-forwarded for the past 18 months.
Commonwealth Bank chief economist Stephen Halmarick said the permanent changes in tax brackets would boost take-home pay and consumer spending.
“If you permanently decrease someone’s tax liability, they can adjust their behaviour on a permanent basis,” he said.
He said the changes to instant asset write-offs and loss carry-back refunds for businesses making a loss due to COVID-19 would be significant in generating economic activity during the recovery.
“All those policies … will really be important in maintaining cash flow while we are in this recession,” he said.
A leading economist has also praised the fast-tracked tax cuts
“The dominant thing is the tax cuts … but there are other things too,” Deloitte Access Economics partner Christ Richardson said.
“The wage subsidies are a good idea for the young unemployed. The government will subsidise them for a year, if we employ them back. Same story around the similar policies for apprentices.”
Mr Richardson said the low cost of debt was also good news.
“The interest payments that we are making are no higher across the entire four years the government’s forecast; in fact they’re lower than they were in 2018.”
DISAPPOINTMENT OVER JOBSEEKER
The Australian Council of Social Service has expressed disappointment that no permanent increase to unemployment benefits was announced in the Budget.
“The Federal Budget had failed to deliver a permanent, adequate JobSeeker rate,” chief executive officer Cassandra Goldie said.
“It leaves more than two million people receiving higher income support uncertain about their future beyond the end of the year, when income support rates will go to their pre-COVID levels – which, for JobSeeker, was $40 a day.
“This Budget provides a glimmer of hope on jobs for young people in a really tough year. While we welcome the wage subsidy for under-35s who are badly impacted in this recession, the Budget lets down 900,000 people on JobSeeker who are over 35.
“We’re calling for the wage subsidy for young people to be urgently extended to people of all ages who have been unemployed for a year or longer.”
DOCTORS GIVE BUDGET A TICK
Federal Australian Medical Association president Omar Khorshid has commended the Federal Government’s $16 billion COVID-19 health response and further stimulus spending.
“The Budget commits $1.1 billion to a COVID-19 vaccine arriving by next July and assumes any further COVID-19 outbreaks will be localised and contained,” he said.
“The Government needs to be willing to rethink scaling back JobSeeker and JobKeeper if a vaccine-led economic recovery is delayed or doesn’t eventuate.
“Governments cannot drop the ball and must continue a broad range of strong policies to keep COVID-19 out of the community in order to ensure a sustained health and economic recovery.”
HELP TO GET AUSTRALIANS ‘BACK ON THEIR FEET’
ANZ economist Cherelle Murphy said the government has thrown a huge amount of fiscal support to the household sector, with the tax cuts more generous than what the bank was expecting.
“There is certainly a lot there to help households and businesses get back on their feet,” Ms Murphy said.
Australian Banking Association chief executive, Anna Bligh said the targeted support spending set the right tone for the country’s economic recovery.
“This budget is a key milestone as we shift from emergency to recovery, from triage to rehabilitation,” Ms Bligh said.
“Government support for small business is vital. Allowing businesses to fully expense investments will provide a much-needed shot in the arm.”
Industry Super Australia has welcomed the reforms to superannuation that will stamp out multiple accounts and allow workers to take their fund with them, but said billions has been left on the table.
“While it is pleasing the government is tackling multiple accounts, stapling workers to a single fund could leave them stuck in a dud fund for life, costing them hundreds of thousands of dollars at retirement,” ISA chief executive Bernie Dean said.
“Underperformance is the biggest cost drain on member savings and dud funds need to be removed no matter what type of fund they are.”
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