Budget 2020: Tax cuts alone won't be enough, Deloitte says

Treasurer Josh Frydenberg. Picture: Sitthixay Ditthavong
Treasurer Josh Frydenberg. Picture: Sitthixay Ditthavong

Income tax cuts alone won't be enough to avoid the cash crunch Australia faces as it emerges from the coronavirus pandemic, analysts have warned.

Deloitte Access Economic's 2020 Budget Monitor found the budget had been "badly bent but not broken" by COVID-19.

The JobKeeper and JobSeeker programs were particular "standouts", with poverty going down in Australia at the same time it was rising in other parts of the world.

Money hit people's pockets faster than during the Global Financial Crisis, and Australia's success against the virus reduced the cost of its emergency measures.

And while around 830,000 jobs were lost when COVID-19 hit, approximately half of those jobs have been reinstated as the country reopens.

However more than three million jobs are relying on the JobKeeper wage subsidy, which starts to roll back from Monday.

"Our prosperity is being beautifully held together by lots of sticky-tape," Deloitte said.

But as government supports are wound back, superannuation money dries up and mortgage and rent moratoriums end, the nation would face a cash crunch in the next six months.

"2020 has been a fight for our lives, but 2021 has to be a fight for our jobs," Deloitte said.

"And whereas the war against the virus is a sprint, getting jobs back is likely to be a marathon."

Treasurer Josh Frydenberg has hinted personal income tax cuts could be brought forward by two years in order to kickstart spending.

Analysis from the Parliamentary Budget Office shows bringing forward the tax cuts would cost $27.7 billion.

But while Deloitte said accelerating the tax cuts would "pump a lot of gas into the economy ... they're not as effective as stimulus as some alternatives".

Federal and state governments should instead go hard by promoting spending and creating new jobs, with investment in social housing and infrastructure.

Permanently raising the rate of JobSeeker payments and pouring money into aged care would also stimulate the economy, Deloitte said.

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Job creation would be a key focus of next week's budget, Mr Frydenberg said.

"As Deloitte state, 'if our economy gets better, then the budget will too', and that is why our renewed fiscal strategy focuses on bringing hundreds of thousands of more Australians back to work which will underpin a stronger medium-term fiscal position," Mr Frydenberg said.

This story Tax cuts alone won't be enough as Australia faces cash crunch: Deloitte first appeared on The Canberra Times.

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