For a fresh perspective on the stories that matter for Australian business and politics, sign up for our new weekly newsletter.
Australia’s government will lay out a spending program to resuscitate a recession-hit economy and generate jobs for the hundreds of thousands of people left unemployed by the nation’s Covid-19 lockdown.
Treasurer Josh Frydenberg is expected to announce a A$220 billion ($158 billion) deficit when he hands down a delayed budget for the year ending June 2021, at 7:30 p.m. in Canberra. The shortfall will be equivalent to 11.6% of gross domestic product, according to the median estimate of surveyed economists.
Five hours earlier, the Reserve Bank of Australia delivers its October interest rate decision, and is expected to keep policy unchanged.
The government’s economic blueprint is expected to backdate to July 1 this year income tax cuts that had been set to start in July 2022, and fast track another round due to start in 2024. It also plans an investment allowance for firms as well as tax breaks for small startups, according to reports. The government has already announced A$1.5 billion to revitalize manufacturing and create jobs and A$1.2 billion to subsidize wages of new apprentices.
It also plans an expanded first-home buyer program and billions of dollars extra in infrastructure funding to state governments on the proviso they use it or lose it. A women’s economic security statement is also expected aimed at cutting the gender pay gap and getting more women into the workforce.
The central bank is working in tandem with the government, keeping borrowing costs low across the economy via its bond-buying and bank-lending programs and ensuring the government can borrow as needed. Tonight’s fiscal blueprint will aim to bring down unemployment — forecast to be 8% by mid-next year and still at 7.2% in mid-2022, when an election is due.
Australia entered its first recession in almost three decades after large tracts of the economy were shuttered to combat Covid-19. An early lifting of restrictions and reopening of the economy was dented when the southeastern state of Victoria suffered a severe outbreak and was forced to enact the toughest lockdown in the nation.
Meantime, states such as mining powerhouse Western Australia, the island of Tasmania and Queensland and South Australia have kept the virus at bay by closing internal borders. New South Wales, the most populous state, has managed to operate a successful contact tracing program that has kept the virus contained.