Catholic Social Services: ‘Federal Budget 2020 fails on fairness’

15 Oct 2020

By Eric Leslie Martin

Coming off the back of the worst global economic slowdown since the Great Depression, this year’s Federal Budget has the monumental task of delivering economic recovery for a nation still reeling from stay-at-home restrictions, border lockdowns and the virtual disappearance of the hospitality and tourism sector, let alone the ongoing hit to retail and industry.

Yet according to Catholic Social Services Australia (CSSA), the overall sentiment from the 2020-21 Budget is one of opportunities missed.

“With hundreds of thousands of Australians struggling to find work or not able to access enough hours of work, they’ll be left to ponder how they will walk their individual path through the pandemic’s aftermath,” said Dr Ursula Stephens, Chief Executive of CSSA.

“The Treasurer spoke in his speech about courage, commitment and compassion, yet many Australians won’t be feeling like they’ve received a great deal of compassion in this Budget.”

Dr Stephens said Pope Francis, in Fratelli Tutti – his encyclical released earlier this month – called for political, economic and social decisions to be assessed based on how they support vulnerable people and by “using that yardstick, we can’t give the Government a passing grade based on the Budget the Treasurer delivered”.

Treasury forecast of the Australian Unemployment Rate as modelled in the Federal Budget 2020. Graph: Sourced.

On 6 October, as Treasurer Josh Frydenberg presented his manifesto for recovery, unemployment in Australia had just decreased from a 22-year high of 7.5 per cent (7.7 consensus) in July to 6.8 per cent, an indication of the success of the Government’s economic stimulus spending during the pandemic, yet still down by 2.6 per cent compared to the same time last year.

According to Treasury, “of the 1.3 million people who lost their job or were stood down on zero hours for economic reasons in April, almost 60 per cent or 760,000 are now back at work”.

However, the unemployment rate is expected to peak at around 8 per cent in the December quarter of this year, and with JobSeeker’s COVID-19 supplement payment of $250 set to end on 31 December, concern exists for the plight for the tens of thousands of Australians who find themselves out of work at the start of the new year.

Long-term, the unemployment rate is not expected to return to 6.5 per cent until the June quarter of 2022.

The challenges for the economy remain significant and until a successful COVID-19 vaccine is developed, further outbreaks of the virus are considered likely – negatively affecting consumer confidence.

Federal Budget 2020, recovery and response table. Table: Sourced.

Rather than spending, people and businesses are still saving in preparation for future economic uncertainty.

A key factor of the Budget is some $17.8 billion in personal income tax relief to support the economic recovery, including an additional $12.5 billion over the next 12 months, with nearly $50 billion in business and personal income tax cuts already passed by Parliament.

In 2020-21, low and middle-income earners will receive tax relief of up to $2745 for singles and up to $5490 for dual income families, with most benefits going to those on incomes below $90,000.

Treasury estimates that reducing the personal income tax burden will boost GDP by around $3.5 billion in 2020‑21 and $9 billion in 2021-22, creating an additional 50,000 jobs by the end of 2021-22.

However, many political commentators question the wisdom of offering income tax cuts when so many people are out of work and highlight the potential compatibility issues of the existing skill sets of those currently unemployed with the jobs created by the infrastructure pipeline.

“Billions of dollars in tax cuts will help some people, but those cuts won’t help those who can’t find work and who appear destined to return to unsustainably low welfare payments,” Dr Stephens said.

“We’re particularly concerned about workers aged 55 and over – some of whom may never work again.”

A key factor of the Budget is some $17.8 billion in personal income tax relief to support the economic recovery, including an additional $12.5 billion over the next 12 months, with nearly $50 billion in business and personal income tax cuts already passed by Parliament. Table: Sourced.

The Government’s $110 billion 10-year infrastructure investment pipeline will create 100,000 jobs but has also come under fire from political commentators, as it includes a number of projects currently under construction, or simply brings forward the commencement date of other projects that have already been announced.

For example, since the start of the COVID-19 pandemic, the Government committed an additional $14 billion in infrastructure projects across Australia over the next four years, supporting more than 40,000 jobs during their construction – these projects have been included in the $110 billion infrastructure pipeline announced in the Budget.

Specific to WA, the Federal Government has recommitted to an investment of $15.4 billion in infrastructure projects, many of which have been highlighted as necessary funding recipients since 2013.

Projects include the: $2.3 billion Metronet; $275.8 million on upgrades to the Great Northern Highway, between Muchea and Wubin Upgrade, and: the $75 million new Canning Bridge Bus Interchange.