The 2020 Federal Budget has outlined a sweeping program of initiatives that will help support economic growth through the COVID-19 period and long into the future.
This comes at a cost to the economy, however, with the Budget papers revealing the deficit will rise to $213.7 billion this year1, dropping to $66.9 billion by the 2023/24 financial year. Additionally, net debt will grow to $703 billion or 36 per cent of GDP this year and peak at $966 billion or 44 per cent of GDP in June 2024.
In his Budget speech, Federal Treasurer Josh Frydenberg noted economic growth is expected to drop by 3.75 per cent in 2020, before a turnaround in 2021 when the economy is forecast to grow by 4.25 per cent. Unemployment is expected to reach 8 per cent in the December quarter, before falling to 6.5 per cent by the June quarter 2022.
Against this backdrop, the Coalition has announced a host of strategies to put the economy back on the path to growth. The plan focuses on jobs creation and boosting consumer and business confidence. Once this phase of the economic recovery is complete, the Federal Government says it will embark on measures to reduce the deficit and national debt.
An array of never-seen-before tax incentives are at the core of the Government’s plan to support the economic recovery. These include:
In his Budget speech, the Treasurer said these provisions were game changing.
“It will unlock investment. It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs. A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester and a food manufacturing business will be able to expand its production line."
“This will boost the order books of the nation. Small businesses will buy, sell, deliver, install, and service these purchases. Every sector of our economy, every corner of our country, will benefit. This is how we will get Australians back to work.”
As part of this year’s Budget the Government has outlined wide-ranging programs to reinvigorate the manufacturing sector, in addition to an ambitious program of nation-building infrastructure development.
It has announced six national manufacturing priorities under a $1.3 billion Modern Manufacturing plan:
This will be backed by $2 billion that has been allocated to research and development, including:
The Federal Government has also announced an expansion of its 10-year infrastructure pipeline, including $14 billion in infrastructure projects to support the creation of 40,000 jobs. The Government has set aside $7.5 billion to invest in national transport infrastructure2, including $2 billion in road safety upgrades and $1 billion local councils road upgrades.
The major projects that have been announced include:
These projects will have a myriad of benefits for business. A more efficient roads and rail network will help boost business productivity. It will also support and provide work for the many businesses operating in infrastructure, engineering and consulting that will benefit from supplying goods and services as national infrastructure programs are rolled out. This funding is in addition to the $11.3 billion in funding already allocated to infrastructure spending in response to the COVID-19 pandemic.
The Government has put together a package to support businesses in rural and regional areas including $2 billion in loans for farmers to recover from the drought, $350 million to attract domestic tourists to regional areas and $317 million for exporters to access global supply chains.
This is a comprehensive and far-reaching suite of measures that is intended to support the Australian economy now and into the future.
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