Treasurer coy on whether tax cuts figure in election strategy

Treasurer Josh Frydenberg is set to hand down an improved budget position when he releases his mid-year budget review this week, but isn’t about to say whether further tax cuts are likely.

Dec 13, 2021, updated Dec 13, 2021
Federal Treasurer Josh Frydenberg (Photo: Steven Saphore/AAP PHOTOS)

Federal Treasurer Josh Frydenberg (Photo: Steven Saphore/AAP PHOTOS)

Deloitte Access Economics expects the 2021/22 mid-year economic and fiscal outlook could see an improvement of more than $100 billion across the four-year budget estimates as a result of a strong recovery in the Australian economy.

But Mr Frydenberg declined to say whether this leaves the coalition room to offer Australians more tax cuts at the 2022/23 budget in March and ahead of the federal election due by May.

“I’m not going to add to that speculation for the budget,” he told Nine Network on Monday.

However, he did announce the government is extending by six months the loan scheme for small businesses, introduced when the coronavirus pandemic first struck.

The SME Recover Loan Scheme allows firms with a turnover of less than $250 million to access loans of up to $5 million over a term of up to 10 years to help deal with the economic impacts of COVID-19.

About 80,000 loans worth around $7.3 billion have been written since the scheme started in March 2020.

“The Morrison government has stood alongside businesses every step of the way with unprecedented support to keep their doors open and Australians in jobs,” Frydenberg said.

Health Minister Greg Hunt also announced telehealth medical appointments would become a permanent feature of Australia’s health system as part of $308.6 million in new spending.

Deloitte Access Economics economist Chris Richardson is predicting smaller deficits of up to $103 billion over the four-year budget period as a result of the economy recovering faster than Treasury had forecast.

“That’s remarkable, given everything that’s gone wrong in the seven months since the budget was released, including Delta’s dawn, iron ore’s collapse, and multi-billion dollar rescue packages,” Mr Richardson said.

“Given that the best way to repair the budget is to repair the economy, that combination of resilience and recovery is helping the budget get its mojo back.”

He said the cost of dealing with Delta was a very small fraction of the cost when the coronavirus first hit Australia’s shores, partly due to the federal government shifting some of the cost on to the states.

Families have also saved a quarter of a trillion dollars since Covid-19 first hit, which is helping to power the recovery now.

Australia’s high vaccination rate also means the recovery will be less fragile.

Deloitte is now expecting a deficit of $91.1 billion for the 2021/22 financial year compared with the $106.6 billion forecast by Treasury in the May budget.

It also predicts a deficit of $61.8 billion for 2022/23 rather than $99.3 billion.

Even so, shadow treasurer Jim Chalmers says the budget is still not in good shape, while questioning the economic recovery.

“We’ve still got that trillion dollars in debt because the budgets full of all those rorts and all that waste,” he told the Nine Network.

“It’s got to be the right kind of recovery. It’s not a recovery if ordinary working people are falling behind because their costs of living are skyrocketing and their real wages are going backwards.”

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