KEY POINTS FROM TREASURER’S PRE-BUDGET SPEECH
The October 6 federal budget will focus on two phases. Firstly, boosting business and consumer confidence which will last until the jobless rate gets back under six per cent. And secondly, shifting away from temporary and targeted support to structural reforms to increase the economy’s potential and improve the bottom line.
“The 2020/21 budget will lay out our detailed plans for getting Australians back to work and businesses back to business in a COVID-safe way,” says Treasurer Josh Frydenberg.
* While the unemployment rate in August was 6.8 per cent, it is expected to rise over coming months due to the lockdown in Victoria and as people re-enter the labour force to look for work
* To date, the government has announced $314 billion in support or around 15.8 per cent of GDP
* The states have provided $55 billion or around 2.8 per cent of GSP
* By the end of 2020-21, Australia’s real economy is expected to be around six per cent smaller than forecast in the 2019/20 mid-year update
* Net overseas migration is expected to fall from around 154,000 in 2019/20 to an outflow in 2020/21 and 2021/22 (that is, lost migrants won’t be replaced in number)
* Population growth is expected to slow to its lowest rate in over a century
* Wages growth is likely to remain subdued for at least the next few years, until the jobs market tightens
* A smaller economy will generate less income for the government over the medium-term (July economic update put the total receipts as a share of GDP at 24 per cent in 2020/21)
* Payments such as pensions and welfare are expected to be “materially higher” than pre-COVID levels as a share of GDP
* The budget will seek to contain the size of government, maintaining the tax-to-GDP ratio below 23.9 per cent
* The coalition is seeking to achieve budget surpluses on average over the course of the economic cycle, building to surpluses of at least one per cent of GDP “when economic circumstances permit”.