Tuesday’s federal budget will be “one of the most, if not the most, important budget since the Second World War,” according to Prime Minister Scott Morrison.
Much has already been announced, but there will probably be a few surprises in the Treasurer’s speech on Tuesday evening.
Here’s what you need to know before Josh Frydenberg’s big day.
What do we know about the federal budget already?
Aside from the huge deficit, it’s likely we’ll see Australia’s debt ceiling lifted above $1 trillion for the first time.
Much of the budget spending is borrowed cash, and with global interest rates close to zero, the cost of cash is at record lows and the government wants to spend big to get people into work and off the dole queue.
“This has been a very difficult time and it is a hard road ahead, but there is a pathway out and on Tuesday night we will be laying out that pathway through the budget,” Mr Frydenberg told Nine News this week.
We know it will be a big-spending budget, and we know the government wants to look like it is rebuilding the nation after the pandemic tore massive holes in Australia’s economic and health outcomes.
“Tomorrow’s budget is going to be all about infrastructure, all about jobs,” Deputy Prime Minister and Infrastructure Minister Michael McCormack said on Monday.
Those plans, combined with calls to cut “red tape” like environmental approvals and to open up a “gas-led recovery”, show the Coalition is willing to stimulate the economy at the expense of the climate.
As environmental groups called on the government to pour money into renewable energy projects – which, economists agree, create more jobs per capita than fossil fuel projects – it appears the government prefers to place people in jobs that exist today rather than taking a punt on more jobs that might exist down the line.
What about tax cuts?
But hovering above all this are the income tax cuts.
Legislated several years ago, the stage 2 tax cuts will lift the 19 per cent tax threshold from $37,000 to $45,000, and the 32.5 per cent tax threshold from $90,000 to $120,000.
At the moment, they are due to come into effect in the 2022-23 financial year.
The stage 3 tax cuts are more controversial as they deliver a big windfall to high-income earners.
Scheduled to come into effect in 2024-25, they will reduce the 32.5 per cent tax bracket to 30 per cent and abolish the 37 per cent tax bracket entirely.
As a result, everyone earning between $45,000 and $200,000 will pay the same marginal tax rate of 30 cents in the dollar.
The cuts have been described as an “inequality grenade” by economists for entrenching inequality in the system, but it appears the government plans to fast-track at least part of the cuts to this year.
It’s been variously reported that both stages of the cuts will be brought forward to the 2020 financial year, and also that only stage 2 will be accelerated.
As always, you’ll have to wait until 7.30pm to find out.
What’s in the federal budget?
Despite the official announcements being made by the Treasurer in his speech to Parliament, this year we already know large chunks of the budget.
In case you’ve missed some of it, the government has already committed to:
- An extension of the JobSeeker coronavirus supplement to December 31 and the JobKeeper payment to March 28, 2021
- $7.5 billion of investment in road, bridge, highway and rail projects across the country
- Investing $2 billion to expand telehealth for another six months
- A $1.2 billion wage subsidy for new apprenticeships and traineeships
- 10,000 extra places in its First Home Loan Deposit Scheme, helping underwrite loans for home buyers so they can get credit with a smaller deposit
- Extending business tax concessions to more businesses, including those with up to $50 million in turnover
- Removing Capital Gains Tax from granny flats
- $1.5 billion over four years for a manufacturing strategy to prioritise industries like space, food and drink, and recycling
- Investing at least $40 million to respond to the recommendations of the aged care royal commission.
All will be revealed after 7.30pm.