Economic & Fiscal Update – July 2020

Yesterday, Treasurer Josh Frydenberg presented the Mid-Year Economic & Fiscal Outlook which is the first since December. Obviously, things are significantly different and Frydenberg’s hopes for a Budget surplus for the first time in 12 years have vanished.

“Australia is experiencing a health and economic crisis like nothing we have seen in the last 100 years” Frydenberg said.

Key economic points:

  • The projected outcome from Treasury is a deficit of $85.8 billion (4.3% of GDP) in the 2019/20 Financial Year and $184.5 billion (9.7% of GDP); this represents a $281.4 billion turn around from the previous December 2019 estimates;
  • The official unemployment rate is expected to peak at 9.25% in the December 2020 quarter;
  • Government Gross Debt is estimated at $851.9 billion (45% of GDP) by 30 June 2021;
  • Total Government receipts expected to decrease by $33 billion in 2019-20 and $61.1 billion in 2020-21.

Key policy updates:

  • Extension of the JobKeeper program to March 2021 as confirmed on Tuesday. There will be the two-tier payment system from 28th September to $1,200 per fortnight for full time workers and those working less than 20 hours or less to receive $750. From 4th January 2021, full time workers will receive $1,000 per fortnight and those working 20 hours or less to $650. And there will be a reassessment of eligibility from 28th September 2020.
  • Early access to superannuation scheme has been extend to 31 December 2020;
  • The Covid-19 SME Guarantee Scheme will be extended until 30 June 2021, allowing business to continue to access these loans. There has been significant uptake of these loans with 15,600 business gaining access to over 1.5 billion; 
  • Regional Relief & Recovery Fund of $1 billion is being made accessible for the regions most affected by the virus including the arts, aviation and tourism sectors;
  • Included in the fund is additional funding for Zoo’s & Aquariums totaling $94.6 million and $36.3 million for Ag show societies to assist with costs incurred with cancellation at late notice;
  • The billion-dollar JobTrainer program continues as announced earlier this month as well as the extend wage subsidy for apprentices and trainees. The wage subsidy has been increased to include businesses employing up to 200 employees.
  • Bring forward of infrastructure spending of $2 billion with $1 billion in ‘shovel ready’ project and another $500 million in road safety works over the next 2 years, other projects to be announced. 

The full release can be found at: https://budget.gov.au/2020-efu/economic-fiscal-update.htm

The Government will announce the 2020/21 Budget on October 6.