The Australian government on Tuesday announced plans to cut income taxes, create jobs for young people and stimulate business investment with a raft of pandemic measures that would create a record 214 billion Australian dollar (approx. 153 billion US dollar) deficit in the current fiscal year.
Treasurer Josh Frydenberg announced his annual budget plans for the year that started on July 1, with economic forecasts based on an assumption that a COVID-19 vaccine will be available next year. But the Treasury Department has warned that economic realities could be “substantially different” from its forecasts without a vaccine.
Net debt will increase to 703 billion Australian dollars (approx. 503 billion US dollar), or 36% of gross domestic product, at the end of the current fiscal year and peak at 44% of GDP in mid-2024 when debt will exceed 966 billion Australian dollars (approx. 691 billion US dollars).
“This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time”, Frydenberg told Parliament.
At its peak, net debt as a share of the Australian economy would be half the current proportion in Britain, a third of the share in the United States and a quarter of the Japanese proportion, Frydenberg said.
More than 11.5 million taxpayers among the Australian population of 26 million people would gain an income tax cut back-dated to July 1, according to plan, which would need parliament’s endorsement.
The government is also offering a “JobMaker hiring credit” to encourage businesses to hire younger Australians, who have suffered most from job losses created by the pandemic.
The government expects JobMaker would support 450,000 young employees.
To boost business investment, the vast majority of companies would be allowed to write off the full value of eligible assets against their tax debt.
“It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs”, Frydenberg said.
Loss-making businesses would also be able to claim pandemic losses against profits they made as far back as 2018-2019, generating tax refunds for many.
The government expects the Australian economy will shrink by 1.5% in the current fiscal year before expanding by 4.75% in 2021-22. Unemployment is expected to peak at 8% in the December quarter before receding to 5.5% in 2023-24.In August, the official unemployment rate was 6.8%.