Budget fallout focuses on tax cuts, worker subsidy and women

The merits of tax cuts and youth wage subsidies as well as the role of assumptions about the passage of the coronavirus have dominated public discussion following the release of the federal budget.

The budget released on Tuesday night featured billions of dollars in spending to boost the economy including tax cuts and the establishment of the JobMaker employment subsidy for young people.



Prime Minister Scott Morrison and Treasurer Josh Frydenberg have used a series of interviews to paint the budget as a shot of confidence to the Australian business community, while the opposition says the budget missed an opportunity to create a new, post-pandemic vision for the country.

The Prime Minister said the tax cuts proposed in the budget would benefit pensioners and those on low and middle incomes and they would be "more likely to spend" the extra cash.

"[But] we will never tell people how to spend money, and when you are talking about tax cuts, this is money Australians have earned and we will let them keep more of what they earn – and that is what we are focused on," he said.

Asked about the absence of free childcare – used earlier this year as a pandemic relief policy – in the budget, Mr Morrison said that "what that does is basically give massive subsidies to those on much higher incomes".



"What we are focused on is weak women's economic security," he said.

Mr Morrison said self-funded retirees had not been forgotten in the budget, saying "the best way to improve the returns and their incomes is to ensure the businesses they've invested in are doing better".

"And that's why the tax cuts that will drive investment and support these businesses, the loss carry-back some of the COVID losses of this year: all of that is going to ensure a stronger economy in Australia."

Youth focus

Mr Frydenberg has defended his focus on young people in the budget.

A new JobMaker hiring credit was announced that will establish a wage subsidy for new hires paid for a year at $200 a week for those aged under 30, and $100 a week for those aged 30 to 35.

Mr Frydenberg was asked whether the initiative, which requires new hires to work for a minimum of 20 hours a week, would discourage businesses from employing older workers.

"We've got a series of other programs [so] this should not be seen in isolation from the broader context of measures that we've undertaken," he said, pointing to the government’s job training program and 50,000 places for short courses.

"And of course, we've got record investments in infrastructure, which are designed to boost job creation across the economy," he said.

Mr Frydenberg admitted though that young people were front and centre in the budget due to the danger that they will be out of work for a long time.

"Our focus on apprentices and our focus through the JobMaker hiring credit is focusing on those workers who may not have had the fully developed experience in the workforce [who] have not had that length of time where they can develop the skills as some of the senior members of the workforce and therefore, they are at a disadvantage," he said.

"And if they stay out of the [unemployment] lines, then that could be a long-term proposition for them. And that's not good news for them, personally, and certainly not good news for the economy."

Mr Frydenberg said the tax cuts included in the budget will only reach their full effect as states and territories ease coronavirus restrictions, and that the budget overall was based on the assumption that Victoria will move out of its lockdown as scheduled and reopen by the end of the year.

"The savings ratio has increased as a function of what has happened with the health restrictions," he told Sunrise.

"People have not been able to go to their local cafe or their local restaurant all their favourite holiday destination, because of those health restrictions. As we have success in suppressing the virus, and those restrictions are eased, more people will spend."

The federal government has also assumed Western Australia will have completely reopened its borders by April, and other states with hard boarders – such as Queensland – will do so by the end of the year.

The Treasurer said the ATO was confident the cuts, which are backdated to July 1, would begin to feed into pay packets before Christmas. The backdated cuts would then be paid with next year's tax returns.

Labor, ACTU says budget leaves too many behind

"If you are over the age of 35, you will lose your wage subsidy in March … and you'll be competing for a job with someone under 35 who is being subsidised for work," Opposition Leader Anthony Albanese said.

"If you are a woman, half the population … [who] are being particularly adversely affected by the pandemic … there is nothing really there to support you, and it is almost like it was an afterthought: a women's economic statement, throw it into the speech."

Shadow treasurer Jim Chalmers said the federal government "fell down" in creating a vision for the future in its budget.

"Central to having confidence in the future is having a government that has a plan for the future and a vision and can explain to people where they fit in that vision," he said.

The Australian Council of Trade Unions has cast doubt on the JobMaker program, claiming it could incentivise businesses to “churn through” employees and discourage long-term employment.

“The problem with this subsidy is that it can be for casual, insecure, short term and part time jobs,” ACTU President Michelle O’Neill told ABC Radio National’s Breakfast program.

“In fact, the employer can get double the subsidy by giving two people a part-time job than if they gave one person a full-time job, and for many young people, particularly those on youth wages, you can't live on a job that gives you 20 hours a week, it's just not enough to put food on the table.”

Businesses, banks rejoice

Business Council of Australia chief executive Jennifer Westacott said the budget would drive job creation through spurring investment and subsidising wages.

"Well I think we can be pretty confident that businesses will hire. For a couple of reasons. First of all, there's a huge package to drive extra investment and we know that when businesses invest that they create jobs," she told the ABC.

"So I think Australians can be very confident that those initiatives last night will see investment and will see job creation."

Ms Westacott said the asset write-off for businesses would encourage spending.

"The beauty of what the government has announced last night is that it will cover the entire economy. And those businesses often say, look I've still got all of the demand, I've got the demand for meat productions I just need new equipment. I need to make that stack up," she said.

"So they start putting on extra plant and equipment. That means they create a work order for someone who builds that equipment. They create a work order for someone to deliver it. They upgrade their IT. They upgrade all their systems. If you're a tradie, you buy new tools, you buy a new ute. Suddenly, you're getting back in business."

National Australia Bank chief executive Ross McEwan has praised the instant asset write-offs, tax cuts, research funding and stimulus measures in the budget.

"The tax incentives to encourage businesses to invest and wage subsidies to create more jobs will be significant contributors to rebuilding Australia’s economy," Mr McEwan said.

“Getting businesses going again isn’t just the responsibility of governments. Companies like NAB must also step up. We all have a responsibility to do our part to ensure Australia emerges as a stronger global player on the other side of this.”

Health funding

Former Australian Medical Association president Tony Bartone says, while funding for the nation's pandemic emergency response, aged care and mental health were among a number of positive announcements, there are "still things that need to be addressed".

"If we look at public hospital, elective surgery waiting lists and emergency department waiting times … [there] were record wait times in a number of our states and jurisdictions [before the pandemic]," he told Today.

"During the COVID pandemic, obviously we had elective surgery frozen in many states and, indeed, in Victoria, for a significant period of time. That's going to put back pressure on people waiting for elective surgery."

Asked for his thoughts the budget assumption that all Australians would be vaccinated against coronavirus by the end of next year, Dr Bartone said a mid-2021 vaccine arrival was "probably the best approximate time frame", but "there is no guarantee".

"In the immediate outlook, it is steady as she goes and positive signs at this stage," he said of public health funding in the budget more generally.

JobSeeker

The Australian Council of Social Service said the budget ignored the unemployed and those on low-incomes, with tax breaks given to those who already have a job.

"It's a crushing letdown for people on JobKeeper who are facing the prospects of no confidence, no certainty, no adequacy of their incomes coming to the end of the year," the council's chief executive Cassandra Goldie said on ABC Radio National.

"There's nothing in the budget beyond the end of the year in terms of fixing the level of social security for people who are affected the worst by this pandemic."

Mr Frydenberg said JobSeeker recipients will need to wait until the end of the year to see what happens to their payments, denying the absence of an announcement about the supplement on Tuesday night means it will definitely disappear in December.

"Both the Prime Minister and I have made clear that, closer to the end of the year, we will make a decision about the future level of that payment," Mr Frydenberg told Ben Fordham on 2GB.

"And that will be based on an understanding of where the labour market dynamic is, because obviously you want to get that payment at the right level so that it encourages mobility in the labor market and people moving into jobs where they're available."

The JobSeeker payment replaced the Newstart allowance of about $40 a day in March.

Last month, the JobSeeker rate dropped by $300 a fortnight, due to a reduction in the extra coronavirus supplement available to those who received the payments.

Ms Goldie also highlighted a lack of attention for those on temporary visas who are not entitled to any government support, and little investment in affordable housing.

With Charlotte Grieve, Mathew Dunckley

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