Australian Federal Budget 2020-21
The Government’s 2020-21 Budget presents a historically big spending approach to deal with the unique set of problems arising from COVID-19 - a struggling global and domestic economy, weak business and consumer confidence, rising unemployment and continuing lockdowns. It is betting a strong stimulus will kick start a consumer and business led spending recovery that will be the drivers for economic growth.
With large Budget deficits now an accepted measure to deal with the economic crisis, the Government has introduced a new phase to the economic response with a raft of revenue and expenditure measures to boost economic activity and job creation. Revenue measures include the bringing forward of personal tax cuts and significant concessions for business such as a 100% write-off for new plant and equipment, carry back of tax losses and R&D incentives, all which have the potential to provide short term tax relief and incentives. They also represent a marked departure from prior Budget measures where there was often a significant lag time before the economic effect was realised. The benefits of expenditure measures such as the large spend on infrastructure, wage subsidies and skills packages in key industry sectors should start flowing through to business over the next 12 months, which the Government hopes will help them stay afloat through the worst of the economic downturn.
The challenge for the Government will be whether the measures will give business and consumers sufficient confidence to spend, and more importantly invest for future growth and employment, and how long the measures can be kept in place to provide the much-needed economic stability. A question mark remains whether this will be enough to steady the economy or whether further policy reform be needed?
As a trading nation, how well Australia weathers the storm may ultimately depend on the recovery of global economies and the finding of a solution to COVID. However, the Government has used every resource at its disposal to make it easier for business to survive to the post-COVID era and generate job growth.
All Budget 2020-21 documents are available to download from the Treasury’s Budget 2020 website.