Labor has signalled it will back the Morrison government’s income tax cuts, and is “inclined to support” the multibillion-dollar investment incentives unveiled in Tuesday night’s budget, but shadow treasurer Jim Chalmers says the business measures require some consideration.
Ahead of the introduction to parliament of an omnibus bill containing both the household and business measures early on Wednesday, Chalmers said voting for the income tax cuts, which Labor has previously supported, was a given, but the opposition would need a bit more time to process the business incentives.
“One of the measurers alone costs $27bn,” Chalmers told the ABC on Tuesday night.
“So we will go through the detail of it and make sure that’s the right and responsible way to spend so much money.
“We are inclined to support it but I think people will understand we will also take a bit of time, whatever time we have available to us, to go through the details and make sure we are getting bang for buck for an extraordinary amount of money.”
The Morrison government confirmed on Tuesday night it would bring forward tax cuts, give pensioners two cash payments of $250, create a time-limited hiring credit for businesses prepared to engage unemployed workers under 35 and supercharge business concessions in an attempt to drag the economy out of its first recession for 30 years.
Under the budget proposals crafted to stimulate investment, business will gain access to full expensing – a measure that will decrease revenue over the forward estimates by $26.7bn. Businesses with turnover of up to $5bn will be able to write off the full value of any eligible asset they purchase for their business until June 2022.
A separate loss carryback measure will allow companies to offset their losses against previous profits on which tax has been paid, which means around 1m companies could be in a position to generate a refund. Under the measure, losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year.
The Treasury estimates that measure will hand tax relief worth $4.9bn to eligible firms over the forward estimates. It says the two measures combined – the expensing and the loss carryback – could boost gross domestic product by around $2.5bn in 2021-22.
The budget is built on a number of optimistic assumptions. The Treasury assumes the Australian economy will contract by 3.75% in 2020 before rebounding strongly off the low base to grow by 4.25% in 2021 – a rate of growth double pre-crisis levels and faster than the growth recorded at the height of the mining boom.
As well as the upbeat growth assumption, the Treasury also assumes the best-case scenario for the pandemic. It assumes an effective vaccine for Covid-19 will be available next year, that internal borders reopen, and international students and migrants return in the latter half of 2021.
The treasurer, Josh Frydenberg, on Tuesday night defended the rosy assumptions. He said the task at the moment was managing considerable uncertainty about the outlook.
“There is a great deal of uncertainty,” he said. “These are projections. These are forecasts, these are made during a once in a century global pandemic.
“But there is a clear path back to jobs and employment for hundreds of thousands of Australians. You see that, as the unemployment numbers come down over time, and you see that as a result of our economic support provided in this package of measures.”
Reaction to the long anticipated economic statement was mixed. The chief executive of the Business Council of Australia, Jennifer Westacott, welcomed the pro-business measures in the budget and backed the government’s decision to phase out jobkeeper by March, saying continuing it would have been unsustainable.
“What we have to do in the budget is get the million people back to work and the best way to do that is to drive business investment, drive activity with really substantial expenditure on encouraging business investment,” she told the ABC.
But the Australian Council of Trade Unions said the budget had failed to deliver on saving existing jobs and creating new secure jobs of the future – and raised fears that the government’s looming workplace relations changes could further undermine confidence.
The ACTU president, Michele O’Neil, also suggested there were deficiencies in the youth hiring credit scheme because employers could get twice as much by hiring two people for 20 hours a week rather than taking on one person full time.
The chief executive of the Australian Council of Social Service, Cassandra Goldie, blasted the government for failing to clarify the future of the coronavirus supplement beyond December.
“It leaves more than two million people receiving higher income support uncertain about their future beyond the end of the year, when rates will go to their pre-Covid levels, which for jobseeker is $40 a day.”
