The Morrison government is considering bringing forward income tax cuts and will extend income support beyond September, the treasurer, Josh Frydenberg, has said.
Frydenberg and the prime minister, Scott Morrison, have been increasingly frank about the need for the extension of economic supports as Victoria re-enters a six-week lockdown to fight the spread of Covid-19.
Although the income tax cut proposal is yet to go to cabinet and the government’s decision on extending the $70bn jobkeeper program will not be announced until 23 July, Victorian businesses are requesting an extra two months of wage subsidies citing the new lockdown.
It comes as banks have announced they will extend the six-month suspension of loan repayments by a further four months for business loan and mortgage customers who are still experiencing financial hardship.
On Wednesday, Frydenberg was asked about bringing forward the second phase of the government’s tax cuts, which extends the upper income threshold at which the 19% tax rate applies to $45,000, and at which the 32.5% rate applies from $90,000 to $120,000.
The tax cuts are due to take effect from 1 July 2022 but the Labor leader, Anthony Albanese, has argued they “should have been brought forward last year” – as the economy showed signs of slowing before the bushfires and the Covid-19 recession.
Frydenberg said: “We are looking at that issue and the timing of those tax cuts because we do want to boost aggregate demand, boost consumption, put more money in people’s pockets, and that’s one way to do it.”
The third phase of income tax cuts is due to start in 2024 and will flatten tax brackets by creating a 32.5% tax rate to apply to income between $41,000 and $200,000.
The shadow treasurer, Jim Chalmers, said that Victoria’s new restrictions were “creating new levels of uncertainty for workers and for businesses, and the Morison government is only adding to that uncertainty by refusing to release the jobkeeper review”.
“If they have a plan for jobkeeper, let’s hear it,” he told reporters in Brisbane. “If they have a plan to bring forward tax cuts, let’s hear that too.”
Chalmers noted Labor had called for the tax cuts to be brought forward for “some time” and promised to engage “constructively and responsibly” once it makes a proposal.
Labor wants the government to accelerate the second phase, and expressed concerns about the flat tax bracket in the third phase despite passing the cuts after the 2019 election.
Earlier, Frydenberg defended the government’s timetable for releasing the jobkeeper review, noting on ABC TV that jobkeeper and the doubling of jobseeker payments are “already legislated to the end of September”.
“So even with the six-week lockdown announced by Premier Andrews, that takes it out to the end of August.”
Frydenberg confirmed “there’s going to be another phase of income support” – a signal that continuation of wage subsidies is more likely than supports for solely for businesses.
“We recognise that some sectors are going to recover more slowly than others,” he said. “For example, the tourism sector as a result of the international borders being closed.
“But we also recognise that the recent events in Victoria are beginning to be an impediment to the speed and the trajectory of the economic recovery across the nation.”
The government estimates that Victoria’s lockdown and the second wave of infections could cost the economy $1bn a week.
The government is spending nearly $1.3bn on the coronavirus supplement each fortnight, new figures show.
Responding to a question on notice from the Senate select committee on Covid-19, the Department of Social Services said 2,242,392 people were receiving the $550 supplement as at 26 June - including 658,378 in NSW, 545,563 in Victoria, and 510,570 in Queensland.
On Wednesday, the Victorian premier, Daniel Andrews, told Radio National Breakfast he had asked Morrison for “recognition that there would be pain, hardship and hurt in Victoria that would be at higher levels than in other parts of the country”.
“I’m confident that all of his policy responses … and any he might have in the future will be based on hardship and therefore they will be of more benefit to Victoria because there will be more hardship in Victoria.”
At a press conference in Canberra, Morrison said he had assured premier Andrews that “where there is the need, then there will continue to be support”.
“And so this is about tailoring a national program to provide support where the support is needed and because of what has happened in Victoria, obviously the need there will be far greater than was previously and that need will be met.”
Alongside the aged care minister, Richard Colbeck, Morrison announced an extra 6,105 home care packages, bringing the total number to more than 50,000 since the 18-19 Budget, at a cost of more than $3bn.
Labor’s Julie Collins said the announcement was “another drop in the ocean” compared to what is required with “still [more than] 104,000 older Australians waiting for home care”.
“There are no new level four packages for the 21,833 older Australians currently waiting for the highest level of home care,” she said.
In an interim report in November the royal commission into aged care found the system was “cruel and harmful”, and warned that lack of home care packages was an “unsafe practice” and amounted to “neglect”.
