Huge tax cuts to be brought forward
An emergency rescue plan is being prepared in the wake of Australia's financial catastrophe, with massive tax cuts on the cards.
Treasurer Josh Frydenberg has hinted that personal income tax cuts worth $20 billion could be brought forward to help the country cope with the devastating recession sparked by coronavirus.
Speaking with the ABC on Thursday morning, Mr Frydenberg indicated that the cuts, originally slated for mid-2022, will be needed much sooner.
They are expected to form a central part of the government's fiscal response to the recession in the upcoming Budget.
"(The cuts) are one issue that we're considering, because we did legislate the tax cuts after the last election," Mr Frydenberg told the ABC.
"They were in three stages. And more money into people's pockets means more spending, and more spending means more jobs."
The income tax cuts for middle income workers would be worth up to $2565 per year.
The significant savings kick in for those earning between $50,000 and $90,000, who will have their total annual tax reduced by $1080.
Those with a taxable income between $90,000 and $100,000 will be reduced by $1215 and those earning between $100,000 and $120,000 save $1665.
From here the cuts increase to $2565 for Aussies earning between $120,000 and $200,000.
A third stage of the tax cuts, with a tax rate of 32.5 per cent to apply to the vast majority of workers, is currently scheduled from 2024.
It could take years to turn around what Mr Frydenberg labelled the biggest recession since the Great Depression.
Economic figures released yesterday for June show the catastrophic extent that months of lockdown have created across the country.
The biggest quarterly fall on record (seven per cent) and the steepest annual plunge since the end of World War II means Australia is firmly in the grip of a deep recession for the first time in a generation.
Previously, the biggest drop was in 1974, when the Australian economy contracted by just 2 per cent in the June quarter.
Asked if the measures will give Australians confidence to start spending again, he said: "The best way to do that is to ease the restrictions.
"That's why what happens in Victoria is so critical to the state's recovery but also to the national recovery, because it goes right to that issue of confidence.
"And if businesses can see a road map out, then they can take the decisions to hire more people, they can take the decisions to invest in growing their business."
That Victorian Government road map, which was leaked today but is believed to be a draft, hints that stage four lockdown will continue for a further two weeks with some minor changes on September 13.
The document shows the government is considering allowing single people and single parents the right to have a nominated visitor at home.
However, the 8pm-5am curfew would stay in place for a further two weeks, as would the restrictions on businesses.
Mr Frydenberg told the ABC that unemployment will be "elevated for some time but this is a national challenge".
"And it does follow the single largest economic shock that Australia - indeed, the world - has ever seen. I mean, to put it into perspective for you, during the height of the GFC, the global economy fell by just .1 per cent. The OECD is now expecting the global economy to fall by 6 per cent this year. It dwarfs what happened."
Asked how long the recovery plan could take to see Australian return to pre-pandemic levels of economic growth, Mr Frydenberg was blunt.
"I think it's going to take years," he said. "So, we have to have patience, but we also need to retain our focus on helping to grow the economy. That's going to involve reforms."
Shadow Treasurer Jim Chalmers warned yesterday that "the plan for the future and the plan for jobs is entirely absent".
"It's not just for the next few months … and not even for the next few years," he said.
"If the government continues to get things wrong, this nation will wear the costs and consequences of that for generations, and that's what we're trying to avoid."
Originally published as Huge tax cuts to be brought forward