The Herald's View: The Treasurer has revealed a workable plan that should take the economy through the COVID-19 recession and keep unemployment to a bearable level
While there is little economic reform, the budget includes a major new round of stimulus worth $98 billion, mostly in the form of income tax cuts for low and middle income earners, business tax cuts and an innovative scheme to pay employers who hire young workers.
The government forecasts unemployment will only rise to 8 per cent, about 4.5 per cent less than if the government had not intervened. Unemployment will remain uncomfortably high at 6.5 per cent in June 2022, when the next election is due, but Australia's performance is expected to be better than most comparable countries.To pay for the stimulus at a time when revenue has collapsed, the federal government will have to borrow about $470 billion over the next four years.
Debt will still be manageable and fairly low by international standards but it remains a serious concern. Once the economy recovers, the next federal government will have to stabilise and then reduce it. The budget tax cuts, which are the largest single expenditure, have been carefully crafted for wage and salary earners on between $37,000 and $120,000 a year. The federal government wisely decided not to bring forward its politically divisive stage three tax cuts, which were skewed to higher income earners.
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