The Federal Government has handed down its 2020 Budget, the most memorable in many years.
The Budget deficit is forecast to reach $213.7 billion this year1, before falling to $66.9 billion by 2023/24, on Treasury’s figures. Net debt will rise to $703 billion or 36 per cent of GDP this year, before hitting $966 billion or 44 per cent of GDP in June 2024.
These figures represent a huge program of spending on infrastructure, manufacturing, training and research and development, designed to reinvigorate the economy after the COVID-19-induced slump.
While these figures seem large, Australia is tracking well compared to other nations. In his Budget speech, the Treasurer Josh Frydenberg noted, “Australia’s net debt as a share of the economy will peak at half of that in the United Kingdom, around a third of that in the United States and around a quarter of that in Japan today.”
Additionally, while economic growth dropped by seven per cent in the June quarter, the local economy performed better than many other countries. Economic growth dropped by 12 per cent in New Zealand, 14 per cent in France and 20 per cent in the UK across the same period.
In the Treasurer’s words: “the Australian economy is now fighting back.”
For retirees on the aged pension, the key initiative announced in the Budget that will help support their cash flow in a very difficult year will be two separate $250 payments to be made from November 2020 and March 2021. These payments reflect the fact the aged pension will not be indexed upwards this year2 given inflation is presently sitting at -0.3 per cent3. In a typical year, the aged pension would rise in line with inflation in March and September. These payments will be in addition to two $750 payments given to aged pensioners in March and July this year as part of the Federal Government’s coronavirus stimulus packages.
For older retirees, the Government acknowledged aged care remains one of its key challenges, with the final report from the Royal Commission into Aged Care to be tabled next February. The Coalition has said it will allocate funding to the recommendations made in the report at the time it is released. For now, the Government has said it will provide $1.6 billion over four years to fund 23,000 additional home care packages. It has also set aside funds for aged care and dementia training and support.
This is in addition to the $1.6 billion the Government has already allocated to the aged care sector during the coronavirus pandemic.
This document has been prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac) and is current as at 6 October 2020.
The information in this document regarding taxation and legislative change is based on policy announcements which are yet to be passed as legislation and may be subject to future change.
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it.