CANBERRA: 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 ($153 billion) 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 ($503 billion), or 36pc of gross domestic product, at the end of the current fiscal year and peak at 44pc of GDP in mid-2024 when debt will exceed 966 billion Australian dollars ($691 billion).
“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. It needs Parliament’s endorsement.
More than 7 million would receive a tax cut of more than 2,000 Australian dollars ($1,430) a year. The tax cuts would cost Australia’s coffers more than 50 billion Australian dollars ($36 billion) over four years.
The government is also offering a “JobMaker hiring credit” to encourage businesses to hire younger Australians. Young people have suffered most from job losses created by the pandemic.
Businesses that provide a job to an unemployed person under 30 years old would be gjven 200 Australian dollars ($145) a week for up to a year. The payment would be half that if the employee is aged between 30 and 35. The employees must be given at least 20 hours of work a week.
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.
Frydenberg said he will introduce into Parliament on Wednesday a bill that would make his proposed income tax cuts and business tax breaks law.
“I want these measures to be implemented as fast as possible,” he said.
The government expects the Australian economy will shrink by 1.5pc in the current fiscal year before expanding by 4.75pc in 2021-22. Unemployment is expected to peak at 8pc in the December quarter before receding to 5.5pc in 2023-24.
