The federal government plans on chartering Australia out of its first recession in almost three decades by spending big on employment initiatives, infrastructure projects and tax breaks.
Many of the policies unveiled aim to encourage spending in key sectors -- such as the construction industry -- as a way to stimulate investment in business and employment.
This includes the government’s expanded First Home Loan Deposit Scheme (FHLDS), tax breaks and exemptions, and changes to superannuation, among many other initiatives detailed below.
Annual growth down almost 4 per cent
The COVID-19 pandemic resulted in a 7 per cent contraction in the June quarter before containment of the virus led to a modest recovery, Treasurer Josh Frydenberg said.
But the recovery won’t be large enough to offset the fall this year. The government forecasts a 3.75 per cent fall by the close of the calendar year, and that unemployment will peak at 8 per cent in the December quarter.
A number of initiatives were announced last night to help the country spend its way back to growth, but this will cause the year’s deficit to reach $213.7 billion and net debt to climb to $703 billion.
Projections to June 2024 forecast the deficit will fall to $66.9 billion, while net debt will peak at $966 billion.
The federal budget is designed to stimulate the economy by getting people back to work, Mr Frydenberg said.
“In the space of just one month, more than one million Australians lost their jobs or saw their working hours reduced to zero,” he said.
“...This budget is all about jobs. There is no economic recovery without a jobs recovery, there is no budget recovery without a jobs recovery.”
More than half of the people who lost their job or had their hours slashed to zero due to COVID-19 are back at work, Mr Frydenberg said.
First Home Loan Deposit Scheme expanded, but with strings attached
The federal government has added 10,000 places to the FHLDS, which guarantees home loans by up to 15 per cent of the property price for first home buyers with at least a 5 per cent deposit.
But in a move that has seen mixed responses, the reformed program has been limited to new-build properties. The first version of the scheme provided first home buyers to purchase either established or new homes.
The pricing caps of properties under the scheme have been increased, reflecting the higher housing prices buyers are facing in some capital cities.
First home buyers purchasing in Sydney and Melbourne can expect their price caps to be lifted by $250,000 to a maximum of $950,000 and $850,000 respectively.
Tax cuts for more than 11 million people
An estimated 50,000 jobs will be created by offering tax cuts to 11 million taxpayers, the federal government announced. The tax cuts are set to be backdated to 1 July this year.
Billions of dollars are tipped to be injected into the economy by reducing the majority of people’s tax bills. Single lower and middle income earners will a cut as high as $2745, while dual income families are expected to receive as much as $5490, when compared to the financial year ending in 2018.
The government also plans on extending its tax offset, offering low and middle income earners from $255 to $1080 in additional relief, dependent on their income.
$3 trillion superannuation system to be revamped
Australians will no longer have new superannuation accounts automatically created for them from July 2021, in one of the key reforms to the $3 trillion system under the federal budget.
The change has been designed to cut down on unnecessary fees being charged to Australian workers.
Other major changes include an annual objective performance test for super funds. Members will be notified if their fund fails the test, and funds that show consistent underperformance will be barred from signing up new members.
Underperforming funds will be publicly listed on the government’s new superannuation comparison website, dubbed YourSuper, which will help Australians compare super fund fees and returns.
Tax exemptions for granny flats -- and a possible grant
The federal government is encouraging people to hire construction workers to build granny flats by eliminating the capital gains tax, in some cases. This is in addition to developments over $150,000 being eligible for $25,000 grants under the government’s $680 million Homebuilder scheme.
Residents will be able to lease their granny flats to their elderly or disabled relatives, and when they sell their property, they will not have to pay capital gains taxes on the value the major renovation adds.
The revised policy position is intended to help about 3.9 million pensioners and 4 million Australians with a disability, while also funneling major renovation work to the construction industry.
Businesses rewarded for hiring young workers
Businesses are likely to be incentivised to employ young Australians with the government’s $4 billion JobMaker hiring credit.
From today until 6 October next year, eligible employers who hire Australians aged 16-35 receiving JobSeeker payments could be able to claim:
- $200 per week per employee aged between 16 to 29 years
- $100 per week per employee aged 30 to 35.
The new employees must work for a minimum of 20 hours per week for the employer to receive the hiring credit.
Government agencies, major banks and employers on JobKeeper payments are not eligible for the JobMaker hiring credit.
The government expects about 450,000 young job seekers to be hired through the program.
-- Journalist Alison Cheung contributed to this article