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Treasurer unveils 'strong' 2-step plan to save Australia's economy

Jessica Yun
·2-min read
Australian Treasurer Josh Frydenberg. (AAP Image/Lukas Coch)
Australian Treasurer Josh Frydenberg. (AAP Image/Lukas Coch)

Treasurer Josh Frydenberg’s new “recalibrated” plan for economic recovery will come in two phases, and will hinge upon getting the unemployment rate below 6 per cent.

In a speech on Thursday evening, Frydenberg said the pandemic would leave the economy 6 per cent smaller by mid-2020 than originally forecast.

The Federal Government’s former approach had been to deliver “budget surpluses of sufficient size” to reduce and eliminate gross and net debt in the medium-term.

But in the face of the Covid-19 crisis, this was “no longer the prudent or appropriate course of action,” the Treasurer said.

“As our economic circumstances have changed, our fiscal strategy must also change.

“The Government will adopt a new two stage fiscal strategy that emphasises jobs and growth. This is key to stabilising and then reducing our debt-to-GDP ratio.”

What is the two-phase strategy?

The first phase of the new strategy will be focused on “boosting business and consumer confidence and promoting jobs and growth throughout the economy,” he said.

“Our first priority must be to secure a strong and sustained economic recovery and drive the unemployment rate down as fast as possible.”

This phase will involve a continuation of the stimulus payments, tax measures to promote business investment, and “structural reforms,” Frydenberg said.

However, Phase 1 will not move onto Phase 2 until the unemployment rate is “comfortably” below 6 per cent, he said.

Phase 2 will be about restoring Australia’s “fiscal position”.

There are three elements to this: a “central focus on jobs and growth,” a shift to stabilising gross and net debt, and “rebuilding fiscal buffers” to prepare for the next economic shock.

“We have a big mountain to climb. But this is an achievable goal. And it does not require us to increase taxes or reduce spending on essential services,” he said.

“It will maintain our emphasis on fiscal discipline, lower taxes, containing the size of government and investing in a strong economy.”

Frydenberg also revealed that the budget would not contain higher taxes, but also indicated that it was looking at withdrawing government support.

“Let me be clear. The road to a stronger economy and building back our fiscal buffers is not through endless Government subsidies,” he said.

The original JobKeeper rate will end this Friday, with the new rate – which reduces payments by $300 – to kick in on Monday.

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