The Business Council of Australia wants to see a reforming budget when Treasurer Josh Frydenberg hands down his delayed fiscal strategy in a few month's time.
The treasurer released an interim economic and fiscal update last week, including the first set of forecasts since December last year gave the traditional May budget has been delayed until October 6 because of the coronavirus pandemic.
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It predicted huge budget deficits, a further rise in unemployment, and confirmation the economy is suffering its first recession in nearly three decades.
As such, Business Council chief executive Jennifer Westacott says it has to be a reforming budget in October.
Need for growth
“You want to see those permanent structural changes to the economy that are going to position us for the next wave of growth,” she told Sky News’ Business Weekend program.
That includes bringing forward personal income tax cuts that have already been legislated and some sort of business investment allowance.
Asked whether she felt the government had given up on further business tax cuts, Ms Westacott replied: “I hope they haven’t.”
“We now have a bizarre two-tier tax rate with one of the highest headline rates in the world,” she said.
Small and medium-sized businesses are heading towards a 25 per cent tax rate, but big business remains stuck on 30 per cent.
Ms Westacott also wants an adequate rate for JobSeeker that is higher than the old, pre-pandemic Newstart allowance of $40 a day.
Mr Frydenberg said on Sunday the Morrison government was “favorably disposed” to extending the coronavirus supplement dole payment beyond Christmas.
The government last week extended the JobSeeker supplement beyond its legislated September cut-off until the end of the year, although it will be reduced from $550 to $300, bring the overall dole payment to $800 per fortnight.
‘Favourably disposed’
In the economic update, Treasury forecast the unemployment rate peaking at 9.25 per cent by the end of the year, compared with 7.4 per cent now, which would equate to a further 240,000 people being out of a job.
“We’re favorably disposed to continuing it, but we’ve got to do an assessment of where the jobs market is at that time,” Mr Frydenberg told ABC’‘s Insider program on Sunday on the outlook for JobSeeker.
“It’s about getting the balance right so that there are incentives for people to return to work, and at the same time, providing the safety net.”
Certainty needed
Shadow treasurer Jim Chalmers wants to see certainty on the outlook for JobSeeker sooner rather than later.
“Almost two million people will be relying on this payment and need and deserve a bit of certainty about what it is,” he told Sky News’ Sunday Agenda program
The update forecasts a budget deficit for the 2019/20 financial year of $85.8 billion, rising to $184.5 billion in 2020/21.
AMP Capital chief economist Shane Oliver expects the government will be forced to provide at least a further $20 billion in stimulus between now and the delayed May budget on October 6, and he also thinks revenue will recover more slowly than the government anticipates.
That would see the 2020/21 deficit ballooning to $220 billion.