On the 23 July 2020, Treasurer, the Hon Josh Frydenberg MP, unveiled what is set to be known as one of the most significant economic updates in Australian history, recapping changes to the COVID-19 Stimulus package and the latest figures on Australia’s growing debt and deficit.
The Nexus team has analysed the announcements and discussion of today’s economic update and present our key insights on the impact and reverberations stemming from the Treasurer’s substantial announcement
HISTORIC DEBT & DEFICIT
The Treasurer announced Australia’s biggest deficit since the Second World War, with the 2019-20 deficit reaching $85.8 billion, and the 2020-21 deficit projected to reach a staggering $184 billion. Australia’s Gross debt will swell to $851.9 billion by the end of this financial year. Net debt is expected to be $488.2 billion (24.6 per cent of GDP) at 30 June 2020, and increase to $677.1 billion (35.7 per cent of GDP) at 30 June 2021. Real GDP is predicted to grow by 2½ per cent in 2021, after a fall of 3¾ per cent in 2020.
The Treasurer underlined that the economic figures provided were “highly uncertain” and that the pandemic was a “once-in-a-century shock that is placing immense pressure on health systems and economies” underlining that Australia has outperformed nearly every other country on both fronts throughout today’s update.
In response to today’s economic update, Shadow Treasurer, Dr Jim Chalmers MP, stated that “A lot of Australians are understandably very anxious. There is a lot of uncertainty. What they need to hear from the Government today is not just how grim it is but what they will do about it.”
JOB KEEPER CHANGES:
Over $30 billion has been provided in support through the JobKeeper program so far this year, helping almost a million businesses and supporting approximately 3.5 million employees. Due to continued economic challenges stemming from COVID-19 Pandemic, from September 28, 2020, a variety of changes to the JobKeeper and JobSeeker programs will take effect.
The Treasurer stated today that “Without the government’s support, unemployment would have been five percentage points higher,” and confirmed that JobKeeper changes will go ahead, falling from $1,500 a fortnight to $1,200 a fortnight in September and reducing again to $1,000 in 2021. People working fewer than 20 hours a week will receive $750 in September and $650 in 2021.
To continue receiving the subsidy, businesses will be required to show a reduced turnover each quarter – meeting the test for the October to December quarter, and again for January to March. Businesses and not-for-profits will still need to demonstrate that they have experienced a decline in turnover of 50 per cent for those with an aggregated turnover of more than $1 billion; 30 per cent for those with an aggregated turnover of $1 billion or less; or 15 per cent for Australian Charities and Not-for-profits Commission-registered charities (excluding schools and universities).
The Treasurer says the cost of extending the scheme at the new reduced rate until March would be $16 billion. The extension brings the total cost of the program to $86 billion.
JOB SEEKER CHANGES:
The Treasurer also announced that the JobSeeker payment will drop from $1,100 to $800 a fortnight in September. The coronavirus supplement, currently $550, will be reduced to $250 until the end of the year, meaning maximum rate someone can receive will be approximately $800. The income threshold will be increased to $300 until the end of the year, meaning individuals will be able to earn up to $300 per fortnight without foregoing any JobSeeker payment or affecting their eligibility for the Coronavirus Supplement.
The new arrangements for the Coronavirus Supplement are expected to cost an additional $3.8 billion. Mutual obligation will also restart on 4 August and people will need to undertake four job searches a month.
Shadow Treasurer, Dr Jim Chalmers MP, tweeted that “With unemployment rising and forecast to hit 9.25%, Australians need and deserve a plan to tackle the jobs crisis in this recession and create well-paid, secure jobs into the future. After months of delays, we still didn’t get that plan from the Morrison Government today”.
JOB TRAINER & HOME BUILDER
The Treasurer provided further details on the recently announced JobTrainer fund, that will provide for around 340,700 additional training places to help school leavers and job seekers gain the skills they need to get a job.
The Australian Government is set to invest $2 billion into the program, that will provide hundreds of thousands of Australians the opportunity to access to new skills by retraining and upskilling them into sectors with job opportunities, as the economy recovers from COVID-19.
The Government also gave additional context on the HomeBuilder grant, a limited time grant program to help the residential construction market to bounce back from the Coronavirus crisis. The Treasurer announced that the grant is expected to support an addition $1.6 Billion in dwelling investment.
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