Introduction
Last night I announced the Morrison Government’s plan to rebuild the economy, create more jobs and secure Australia’s future.
COVID-19 is primarily a health crisis which has created an economic crisis like no other.
Unlike the Australian recessions of the early 1980s and 1990s, this pandemic has created both a supply side and demand side shock, driving a sharper and deeper economic downturn.
And our economic toolkit has been constrained, with monetary policy having less room to move as the cash rate was already relatively low pre-crisis.
COVID-19 has seen the Australian economy go into recession for the first time in almost 30 years.
Tragically, many Australian’s have lost their lives and many Australians have lost their jobs and livelihoods.
In response, the Morrison Government has provided record support to households and businesses, to cushion the blow and build a bridge to the other side of this crisis.
Last night’s Budget sets out the next stage of our economic plan as we move to the recovery phase of this crisis.
This plan enables Australians to look to the future with confidence and hope.
Today I want to outline:
- Why the measures in last nights Budget are the right ones at the right time helping to get hundreds of thousands of Australian back into jobs;
- And how our plan will rebuild the Australian economy, making it stronger and more productive in the future.
Responding to COVID-19
COVID-19 has tested our health systems and it has tested our economies.
Through swift and decisive action on the health front, and our world class health system, Australia has achieved some of the best health outcomes in the world.
As we have seen overseas, without the strong health measures put in place to contain the spread of the virus, and the actions and sacrifices of Australians, many more lives would have been lost.
Our economic response to the crisis has also meant that we have avoided the fate of many other nations performing better than all of the major advanced economies.
Had we not responded, we would have seen cascading job losses and business closures.
Our response softened the economic blow, kept businesses in business and Australians in jobs.
Instead, our actions put a floor under the economy.
JobKeeper has been the centrepiece of our initial response.
It has been an economic lifeline for around 3.5 million people employed in over 900,000 businesses.
When the JobKeeper Payment was announced, consumer confidence increased for nine consecutive weeks.
Along with our other response measures we were able to replace much of the income that was lost when the health restrictions hit.
In the June quarter, overall household disposable incomes rose, by 2.2 per cent.
The average income of our lowest income households increased by 20 per cent between the March and June quarters.
As the Deputy Governor of the Reserve Bank said recently “the fact that household income rose in the quarter does not mean that the stimulus was overdone. Absent the stimulus, the decline in GDP and employment would have been significantly larger”.
Without these initial and urgent rescue measures, 700,000 more Australians would have lost their job and 200,000 businesses would have run out of cash by the end of the year; many to close their doors and never to reopen.
Unlike most advanced economies, Australia did not have a double digit contraction in economic growth in the first half of 2020.
And already, there are early signs that the Australian economy is fighting back.
Businesses are reopening their doors and people are getting back to work.
Of the 1.3 million people that lost their jobs or were stood down early in the crisis, more than 760,000 are now back working.
As restrictions continue to ease across the country, we need to ensure our policies are supporting and accelerating the recovery.
Our crisis response policies were the right ones to get us to this point.
In Treasury’s review of the JobKeeper program in June they found that the “JobKeeper has a number of features that create adverse incentives which may become more pronounced over time as the economy recovers. [I]t dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support.”
With the economy reopening, our policies are transitioning with JobKeeper scheduled to end in March.
Our policies, as outlined in the Budget last night, are designed to get Australians back to work and rebuild our economy.
Rebuilding our economy and creating more jobs
Last night’s Budget outlined the next phase of our plan, with just under $100 billion of new COVID-19 response and economic recovery measures.
This Government’s first, second and third priority is to get Australians back into jobs.
The history of recessions is that unemployment rises rapidly, but falls slowly. That is the lesson from Australia’s experience.
Following the recession of the early 1990s, it took nearly 10 years for the unemployment rate to return to pre-recession levels.
For younger Australians, it took longer; around 15 years.
This time we are striving to do better.
The quicker we get people back into work, the stronger our economic recovery will be.
There can be no economic recovery, and no budget recovery, without a jobs recovery.
That is why jobs are at the centre of last night’s Budget.
Our Economic Recovery Plan creates jobs in three key ways.
- It grows the economy by continuing to support spending and aggregate demand;
- It supports business, making it easier for them invest, innovate and hire; and
- It provides incentives for Australians to get back into jobs and take up new opportunities.
Growing the economy
First, we are creating jobs by putting more money in the pockets of everyday Australians to spend in their local communities.
Household consumption represents more than half of the economy, so we need households to have more money in their pockets and the confidence to spend it.
Our Economic Recovery Plan will see significant additional support flow to households.
This will see disposable income continue to remain above pre-COVID levels, even as our temporary crisis support measures are gradually unwound.
More than 11 million Australians will benefit directly from $17.8 billion in income tax relief.
This is the third year in a row that the Government has delivered lower taxes for Australians.
We have brought forward Stage 2 of our legislated Personal Income Tax Plan by two years and extended the Low and Middle Income Tax Offset for an additional year.
Australians will receive up to $2745 for individuals and $5490 for couples in tax relief compared to 2017-18.
More than 7 million Australians will receive more than $2000 in tax relief.
The majority of the benefits for 2020-21 will go to those on incomes below $90,000.
More money in Australian’s pockets means more spending.
Whether this is at your local grocer, your mechanic, your local café or a weekend getaway, more spending means more sales and more sales means more jobs.
As sales increase in our local businesses, business confidence will improve and encourage them to invest and create more jobs, creating a virtuous cycle through the economy.
Treasury estimates that the personal income tax relief from this Budget will create an additional 50,000 jobs by the end of 2021-22.
We are also providing $2.6 billion for two additional Economic Support Payments totalling $500 to pensioners and a range of other eligible income support recipients.
This will support senior Australians at a particularly difficult time and further support our economic recovery.
Supporting business
Secondly, we are creating more jobs by enabling businesses to innovate, hire and grow.
For businesses, both large and small, the outlook remains highly uncertain.
Some will be weighing up whether to keep their doors open, make a new investment or to hold back until the outlook is clearer.
Some will be deciding whether to give a new young school leaver their first chance at a job.
The measures I announced last night are designed to tip the balance in favour of hiring, investing and innovating.
Our Economic Recovery Plan includes the most significant incentives ever provided for businesses to invest.
They will improve the viability of Australian businesses and create jobs across the economy.
Our unprecedented investment incentives will be available to over 99 per cent of all businesses that together employ around 11.5 million workers.
It will allow these businesses to immediately deduct the value of business assets they purchase.
Our temporary loss carry-back measure will be available to companies employing millions of Australians.
Working together, these incentives will create a powerful incentive for businesses to make a positive decision; to bring forward their investment plans, receive the cash flow support now and grow their business.
As these businesses grow, they will need more workers.
Treasury estimates that our business tax incentives will see 50,000 additional workers in a job by the end of 2020-21.
At the same time we are also making it easier for businesses to do business, become more competitive and take advantage of new emerging opportunities.
We are lowering energy costs through our Gas–fired Recovery package by investing $1.9 billion in new and emerging technologies.
We are providing funding to accelerate the delivery of important transmission projects that lower energy prices and create a more stable grid.
We are also cutting red tape to reduce costs and make businesses more dynamic. This includes:
- automatic mutual recognition of occupational licenses and registration between states;
- faster and improved services for farmers and businesses who export agricultural products;
- mandating e-invoicing for Commonwealth agencies; and
- investing in fast-tracking environmental assessments.
Our recently announced insolvency reforms will also give small business that do face financial difficulty every opportunity to restructure and keep more workers in jobs.
The credit reforms we announced will remove unnecessary barriers to accessing credit so that consumers can continue to spend and businesses can invest and create jobs.
These changes, and many more, all work together to reduce costs for Australian businesses, encouraging them to innovate, hire and grow.
Incentives to get back to work
Thirdly, we are creating jobs by helping to equip workers with the skills they need to find work.
We have established the $1 billion JobTrainer Fund, which will support up to 340,000 additional free or low-fee training places in areas of genuine need to help upskill and retrain job seekers.
The JobTrainer fund will ensure job seekers of all ages remain engaged and have the opportunity to acquire skills that will help them get a job.
At the same time, we need to do even more to support younger job seekers.
Young Australians have been disproportionately affected by this COVID-19 recession.
Employment for young Australians remains 8 per cent below its pre-COVID-19 level.
And looking more broadly at the labour force, employment is only 3 per cent below.
Lessons from past crises show that young people are often the last in and first out of jobs.
Having put more money into the hands of households and businesses, we need to make it more attractive for firms to take on new young workers.
That is precisely what the new JobMaker Hiring Credit is designed to do.
It is a crucial part of our economic recovery plan.
It will support around 450,000 positions for young people.
By targeting people aged 16 to 35 that have received the JobSeeker Payment, Youth Allowance or Parenting Payment for at least one of the previous three months, the JobMaker Hiring Credit will give young job seekers a hand up into a job.
And to ensure we are supporting new jobs, employers must demonstrate that they have increased their overall employment.
We are also investing in education, skills and apprenticeships, to help young jobseekers get into the jobs that they want and that businesses need.
Our new Boosting Apprenticeships Wage Subsidy will support up to 100,000 new apprentices and trainees by paying 50 per cent of their wages, up to a cap of $7,000 per quarter.
We are also investing almost $300 million to provide an additional 12,000 undergraduate places at our universities, providing more pathways for young jobseekers.
By supporting young people back in to work sooner we can avoid the long term impacts of scarring on the labour market and give them a better, brighter future.
That is our Plan to create the jobs we need: Growing our economy, supporting business and providing incentives to get people into work.
The Budget shows that our Plan will strengthen the economy.
Real GDP is forecast to grow by 4¾ per cent in 2021-22 as our economy continues to open up and as our new policy support measures flow through the economy.
The unemployment rate is expected to peak in the December quarter at 8 per cent and decline to 6½ per cent by the June quarter 2022 and continue to decline over the forward estimates to reach 5½ per cent in the June quarter 2024.
Our individual tax, business and labour market measures each help to create more jobs.
But working together, as a comprehensive plan, their effect on the economy is enhanced.
The Budget forecasts that almost 950,000 new jobs will be created within the next four years.
And Treasury has estimated that without our policy support the unemployment rate would have risen and remained above 12 per cent right throughout 2020-21 and 2021-22.
This policy support, however, has come at a substantial fiscal cost.
COVID-19 will see our deficit reach $213.7 billion or 11 per cent of GDP this year.
Net debt will peak at $966 billion or 44 per cent of GDP in June 2024.
This is a price worth paying to help Australians through the greatest economic challenge of our time and set us on a path to recovery.
We owe it to the next generation to ensure a strong economy so that their lives are filled with the same opportunities and possibilities we have enjoyed.
With good, sound economic management, our fiscal position is manageable.
Historically low interest rates means that despite the increased debt burden, our interest bill remains lower than in 2018-19.
Our debt remains low compared to most other advanced economies.
Australia’s net debt as a share of GDP will peak at half of that in the United Kingdom today and around a third of that of the United States.
The road ahead will be challenging and the outlook is uncertain.
The economic forecasts in the Budget are made by Treasury on the best available evidence today.
Namely, that domestic outbreaks of the virus continue to emerge, but are largely contained, such that large-scale lockdowns are avoided and restrictions continue to ease.
Domestic borders are assumed to reopen around the end of this year.
International travel, including by tourists and international students, is assumed to remain largely closed off until late next year and then gradually return over time.
And a vaccine is assumed to be available around the end of 2021.
Vaccine or not the temporary and targeted measures in this Budget will create jobs and drive our economic recovery.
We know that the road out of this crisis will be unpredictable.
That’s why the Budget outlines possible alternative upside and downside scenarios.
We take nothing for granted.
As we have done throughout this crisis, we will continue to adapt our response as circumstances evolve.
But whatever the future holds, the measures we have put in place in this Budget will make our economy stronger than it would otherwise have been.
And that means more Australians in jobs than would otherwise be the case.
These policies will make the Australian economy stronger.
Securing our future
Our Recovery Plan will create jobs and rebuild the economy but our measures have a dual purpose.
As well as getting Australians back into jobs now, our Economic Recovery Plan puts into place longer term structural reforms which will increase the productive capacity of the economy.
It will make our economy more dynamic, competitive and resilient.
Take our tax plan.
We are putting more money in people’s pockets now to support the recovery. But we are also reforming the tax system to encourage greater economic participation.
In 2024-25, 95 per cent of taxpayers will face a marginal tax rate of no more than 30 cents in the dollar.
This will provide more reward for the efforts of hard-working Australians and further improve incentives to work throughout the economy.
Our unprecedented business tax measures will have an immediate impact on jobs and growth.
But they will also modernise and boost our capital stock, allowing business to innovate, lift productivity and foster growth for years to come.
Our new investments in training will ensure Australia’s workforce has the right mix of skills to support the economic recovery now, but also to take advantage of the jobs of the future.
Our accelerated investments in ‘shovel-ready’ infrastructure will support demand throughout the economy and more than 40,000 jobs across the country.
As part of our record $110 billion, 10-year infrastructure pipeline, these investments will also boost our long-term productivity.
They will see our goods transported around the country more efficiently and at lower cost and reduce congestion, allowing people to move around our cities more easily.
We are also investing a further $2 billion in research and development, supporting our modern manufacturing sector among others, helping Australian companies develop new products and better ways to manufacture goods, agricultural products and high tech medical devices.
We are supporting the faster uptake of digital technologies and improving cyber capabilities.
We are removing barriers to credit for consumers and small businesses.
And we are reforming our $3 trillion superannuation sector, to make your super work harder for you leaving Australians $17.9 billion better off over the decade.
All of these important measures and investments will create new opportunities and secure new jobs for Australians, whatever the future holds.
And as we emerge from this crisis, we will continue to pursue reforms that boost the productive capacity and dynamism of our economy.
Over the course of our Economic Recovery Plan, we will deliver an economy that is stronger, more productive and better prepared to confront future economic shocks.
The underlying cash balance is expected to improve significantly – from a deficit of 11 per cent of GDP this year, to 3 per cent by the end of the forward estimates and 1.6 per cent by 2030-31.
Gross debt will stabilise at around 55 per cent of GDP over the medium term and net debt peaks at 43.8 per cent of GDP at the end of the forward estimates.
The Budget shows that we remain on a path that is fiscally sustainable, and as we build a stronger economy, we will have a stronger budget position, that rebuilds the buffers to respond to the economic challenges lay ahead.
Conclusion
This Budget lays out a clear roadmap to economic recovery from this once‑in‑a‑century shock.
We are helping those out of work to get into work and those in a job to stay in a job.
We are looking to the future and do so with confidence.
Our plan will rebuild our economy
Our plan will create jobs.
And our will secure Australia’s future.