Federal budget unveils Australia’s gaping $213 billion deficit as government spends through coronavirus turbulence


Australia’s budget deficit is this financial year expected to reach $213.7 billion with a net debt of $703 billion, as the government spends big on infrastructure, health and defence amid the worst global economic crisis since the Great Depression.

The federal government on Tuesday unveiled its most generous tax and spending budget ever, with planned tax relief for millions of Australians as it attempts to stimulate an economy devastated by the coronavirus pandemic.

The highly-anticipated budget predicts the staggering $213.7 billion deficit in 2020/21 will fall to $66.9 billion by 2023/24, while the country’s net debt will peak at $966 billion in June 2024.

The new deficit forecast is a far cry from the $6.1 billion surplus predicted in December before COVID-19 set in and the economy reeled into its first recession since the early 1990s.

LIVE: Australian government hands down the 2020 federal budget

But Treasurer Josh Frydenberg remained upbeat in his budget speech on Tuesday evening, saying “resilient” Australians would get through it together.

“The Great Depression and two world wars did not bring Australia to its knees; neither will COVID-19,” he said. 

Treasurer Josh Frydenberg hands down his second federal budget.

AAP

The budget predicts unemployment will peak at a rate of eight per cent in the December quarter of this year, before falling to 6½ per cent by the June quarter of 2022 as economic activity recovers.

This expected peak is lower than previously forecast, but the budget warns further rises are still expected in coming months. Real GDP, meanwhile, is expected to fall by 3¾ per cent in 2020 before recovering to grow by 4¼ per cent in the 2021 calendar year.

‘Substantial uncertainty’

Future forecasts are based on an assumption a COVID-19 vaccine will be widely available by the end of 2021, despite warnings it may not be effective or widespread enough to bring the economy back to normal.

The budget also assumes localised outbreaks will be largely contained, and the Victorian second wave will be brought under control as expected under the state government’s roadmap. But it warns actual outcomes could significantly vary depending on the course of the pandemic.

Mathias Cormann and Josh Frydenberg

Minister for Finance Mathias Cormann and Treasurer Josh Frydenberg head to the budget lockup at Parliament House.

AAP

“There remains substantial uncertainty around the global and domestic outlook,” the budget says.

While an earlier vaccine would be a boon, rolling outbreaks requiring the return of severe restrictions could see economic activity drop by another $55 billion across 2020-21 and 2021-22.

‘A plan for recovery’

Budget measures to stimulate the economy include previously foreshadowed tax cuts for more than 11 million Australians, which the government wants to bring forward and backdate to 1 July.

There will also be a one-off benefit from the retention of the low-and-middle-income tax offset this financial year.

Mr Frydenberg said low-and-middle-income earners would receive tax relief of up to $2,745 for singles or up to $5,490 for dual-income families in 2020-21 compared with 2017-18.

“Australians will have more of their own money to spend on what matters to them, generating billions of dollars of economic activity and creating 50,000 new jobs,” he said.

A new JobMaker hiring credit available to all businesses – besides the major banks – is aimed at encouraging businesses to employ young Australians aged 16-35 on JobSeeker.

The credit will be paid at a rate of $200 a week for those aged under 30 and $100 a week for those between 30-35, with the new hires required to work at least 20 hours a week.

Other big-ticket items announced before Tuesday include a $4.5 billion upgrade to the National Broadband Network and $1.5 billion for a manufacturing strategy.

Road and rail projects worth $7.5 billion will be brought forward to get the Australian economy moving again.
Meanwhile, the government is also boasting record spends on health and the Australian Defence Force.

“We are bringing forward $1 billion in planned defence spending to support jobs as well as extending a range of health and employment programs for our veterans, helping them transition to civilian life,” Mr Frydenberg said.

Health spending will reach $111.5 billion in 2020-21 as the government funds COVID-19 initiatives, extra mental health support and a coronavirus health strategy.

– With AAP



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Kiwis enjoy coronavirus freedom but Jacinda Ardern is bracing for economic turbulence


New Zealand’s government has swung its hastily assembled public information campaign behind an economic push after it’s last active case of coronavirus was cleared.

Previous messaging around social distancing and contact tracing has been pushed to the side, replaced by information around “wellbeing” and “jobs and training”.

The policy pivot from Jacinda Ardern’s government is a remarkable measure of how well New Zealand has fought back the virus.

NZ Prime Minister Jacinda Ardern speaks to the media

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Since the first case appeared on 28 February, the Kiwi government ramped up to a 51-day lockdown and has now eased off on all restrictions except for border controls.

The pivot is also a sign of the suffering that Kiwis can expect to face in the next phase of the pandemic.

“We’re all enjoying the easing of the disruptions but we can’t mistake that for a sign the upcoming recession won’t be bad. It will be,” ANZ New Zealand chief economist Sharon Zollner told AAP.

“It’s fantastic we don’t have any COVID-19 and people are comfortable, they can go to the rugby, they can go dancing, they can go out and about, and that is worth a lot for wellbeing beyond the economic. 

“It doesn’t mean we’re not going to have a hard recession. There is a tourism-sized hole in our economy.”

Ms Zollner said international tourism accounted for five per cent of the Kiwi economy.

Her bank’s latest projection was New Zealand’s GDP would be eight to 10 per cent smaller this Christmas than it was last year and that unemployment will be “in the low double digits”.

In last month’s budget, the NZ government predicted GDP will shrink by 4.6 per cent in 2020, with unemployment peaking at 9.8 per cent.

Prime Minister Jacinda Ardern admits much now depends on the ability of Kiwis to retrain and move into other sectors. 

“Horticulture, the dairy industry, they desperately need workers so we need to support people into those jobs,” she told 1News on Tuesday.

“The early signs are that we are on the optimistic side of recovery.

New Zealanders Return To Normal Life Under COVID-19 Alert Level 1 As Country Records No Active Cases

Morning pedestrian traffic returns to Wellington during the first day under COVID-19 Alert Level 1 restrictions

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“Things are coming back into play a bit more quickly but we know it will take time.

“We know people have lost work, be it in tourism or otherwise … we’ll be utterly focused on jobs, jobs, jobs.”

The budget included a $NZ1.6 billion ($A1.5 billion) package towards apprenticeships and trades, noting that Australia will be competing for the same labour market after the establishment of a trans-Tasman bubble.



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Virgin Australia staff react to airline’s insolvency as Queensland tourism braces for turbulence


Updated

April 21, 2020 18:10:31

Pilot Daniel Lang was among the 80 per cent of staff stood down by Virgin Australia in late March, but already had another job when the company today announced it had entered voluntary administration.

After flying with Virgin for 12 years, he’s now stacking shelves at his local supermarket.

Key points:

  • Administrators Deloitte say more redundancies aren’t planned, but some staff aren’t waiting to find out
  • For some pilots, it’s a case of deja vu after Ansett’s failure
  • Tourism regions say they rely on low airfares from competition, and high capacity

Mr Lang said he updated his resume and drove around Brisbane in the hope of finding a new job and was grateful when a local Woolworths took him on for a few shifts each week.

“I never thought anything like that was beneath me. At the end of the day it gives me a purpose,” Mr Lang told ABC Radio Melbourne.

“I can put some food on the table for my family, and my two kids.”

Deloitte, the administrators appointed to Virgin Australia overnight, said there were “no plans to make any redundancies”, but that’s little comfort for those waiting to hear what happens next, or the 1,000 people already made redundant in recent weeks.

Mr Lang’s new duties include stacking shelves, working at the checkout and unloading pallets of items.

The pilot said staff at Virgin Australia knew the airline was struggling financially, despite the best efforts of a new management team installed last year.

The coronavirus pandemic was the straw that broke the camel’s back.

“No-one could foresee the severe impact this was going to have on the global economy, let alone Australia’s economy,” Mr Lang said.

“Unfortunately it will be the travelling public that pays for it, if there is a monopoly left in Australia.”

Mr Lang called on the Federal Government to help the airline to save 10,000 employees and a further 6,000 whose jobs were linked to the airline’s operation.

Pilot lost his job at Ansett and now Virgin

Virgin Australia pilot Andrew Backstrom previously worked at Ansett for eight years, then clocked up 19 years with his current employer.

“You really think about everyone around you — Ansett also had that family atmosphere,” he said.

“As a pilot I could pursue another career somewhere else, whereas ground handlers, people who’ve been there a long time, check-in staff, they didn’t have the options that we did, so you really feel for them.

“That’s very similar to what we’ve got now with Virgin — you worry for the other people in the family, as well as your own troubles.”

Mr Backstrom said he lost his job when Ansett shut down but at that time Virgin was hiring.

“It’s of great concern for us — if Virgin wasn’t to go ahead, [an alternative airline] is going to take a lot of years and the jobs would be slow in coming. A pie-in-the-sky thought to hang onto,” he said.

“You’d rather see Virgin continue as the airline that it is.

“We provide an integral part of the infrastructure that the rest of the country can thrive around.

“We’re part of a much bigger network that relies on us being in the market.”

Queensland tourism relies on airline

Development Minister Cameron Dick said regional Queensland needed two airlines.

“That is so critical, particularly to regional Queensland,” he said.

“Anyone who remembers what happened when Ansett disappeared knows how catastrophic it was for regional community in our country.”

Destination Gold Coast said the decision by Virgin Australia to go into voluntary administration was a devastating blow.

CEO Annaliese Battista said nearly 15 per cent of the Gold Coast’s domestic fly market relied on Virgin and she feared prices would skyrocket without a second airline.

However, Ms Battista also hoped going into voluntary administration could help the airline.

“It may well mean the airline can survive, albeit in a different format post-COVID-19, and we’ve advocated very strongly for two airlines to be operating at the end of this crisis,” Ms Battista said.

“We know that pre-COVID-19, 46 per cent of all travellers that flew to the Gold Coast from within Australia flew on a Virgin group airlines flight. That was worth $1.93 billion to the local economy — it was incredibly significant.”

Townsville Enterprise CEO Patricia O’Callaghan said exorbitant airfares could jeopardise a number of recovering industries.

“Trade, investment and the rebuild of our tourism market are relying on competitive tension in our air,” Ms O’Callaghan said.

“It could be some time before international airways are opened up again and we need to look at our domestic opportunities.”

Townsville Enterprise said Virgin Australia accounts for a third of the 1.7 million passengers that travel to the region annually.

“We also need to acknowledge that over 600 jobs are at the airport and a number of them rely on the supply chain through Virgin Australia,” Ms O’Callaghan said.

Cairns Mayor Bob Manning said more than 30 per cent of Cairns’ economy is tourism based and losses in the aviation industry would hit the region hard.

“This town is driven by tourism and by aviation,” he said.

“Australia has an incredibly vibrant and attractive tourism industry — airlines are the key to that.

“The possibility of Virgin having a serious haircut and coming back and fulfilling that [budget] role … I think offers the absolutely best prospects for regional Queensland.”

Topics:

air-transport,

covid-19,

business-economics-and-finance,

travel-and-tourism,

company-news,

tourism,

industry,

work,

community-and-society,

people,

human-interest,

brisbane-4000,

qld,

australia,

mackay-4740,

townsville-4810,

cairns-4870,

surfers-paradise-4217

First posted

April 21, 2020 17:09:46



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