Tonight’s delayed 2020-21 budget is expected to be big on spending and economic reforms all aimed at boosting demand and jobs.
It will be light on issues that might be too divisive politically and deflect the thrust of fiscal policy to support demand in the economy and start the reduction in the level of unemployment.
Most of the measures have already been leaked, mentioned or even detailed.
The latest was the $1.4 billion wage subsidy for around 100,000 apprentices, a good decision but one that could have been done at any time in the past five years such as bene the need for a boost to skilled labour.
Dr Oliver says there will be an extra $30 billion in stimulus spending announced on Tuesday night. “the budget deficit for this financial year is likely to be around $230 billion (up from $184.5 billion back in July).”
He wrote in a weekend note that the fiscal measures in the budget are expected to be:
• a bring forward of the July 2022 tax cuts to July 2020 or July 2021 (at a cost of around $15 billion) and possibly the July 2024 tax cuts to July 2022;
• an investment tax break for all companies;
• an extra $10 billion in infrastructure spending to state governments on a “use it or lose it” basis;
• a new wage subsidy tied to increased employment to replace JobKeeper;
• more support for the housing sector – probably via an extension of HomeBuilder and an expansion of the First Home Buyer Deposit scheme;
• $1.5 billion in initial funding to help encourage manufacturing in six key areas;
• fringe benefits tax exemptions for businesses for eg retraining workers, supplying laptops & phones to workers;
more health spending; and
• possibly more stimulus payments for welfare recipients.
More details around how the Government proposes to further its reform agenda around training and education, deregulation and industrial relations are also likely. The Government is also likely to affirm its commitment to not commence budget repair until unemployment is comfortably below 6% and to not raise taxes when it does so.
