07.10.2020Federal Government Budget 2020-21 Briefing Note

Rebuilding Australia’s economy

The Federal Government Budget 2020-21 is one of Australia’s most important in living memory.

Against the backdrop of a global pandemic, the Morrison Government has provided its vision to navigate Australia out of the economic crisis COVID-19 has created.

The aim of this budget is to cushion the blow and reset Australia’s economy.

The Government has announced a forecast budget deficit of $213.7 billion in 2020-21 – just over 10 per cent of the nation’s GDP. That figure is expected to drop to $66.9 billion by 2023-24.

Total net debt is forecast to rise to $966 billion by 2023-24.

The budget represents the beginning of a broad strategy to drive economic growth, with a focus on jobs, tax cuts and business support measures.

Other measures announced include the building of new infrastructure, stimulus for the housing sector and the funding of skills development.

With COVID-19 demonstrating how quickly highly fragmented global supply chains can evaporate, manufacturing capabilities will be boosted in six priority areas.

Business support measures will help ensure jobs are created and economic growth can continue. They include instant tax write-offs and the loss-carry back scheme for eligible businesses.

The Committee notes that tax cuts promised by the Coalition in the 2018 and 2019 budgets have been brought forward to help boost household and consumer confidence.

The Stage two tax cuts legislated to start in mid-2022 have been brought forward to July this year. The top threshold of the 19% tax bracket will rise to $45,000, while the top threshold of the 32.5% bracket will rise from $90,000 to $120,000.

Net overseas migration is expected to contract by 71,600 this year and another 21,600 the following year, before stabilising in 2022-23. This record drop will have far-reaching consequences for the economy.