How should you tackle financial stress?
The Federal budget has always been the primary document that shapes the economy and society of Australia with its policies and decisions on cogent matters such as expenditure, savings, borrowing, and investments. In line with this, previous budgets have been prepared in such a way to ensure that every aspect of the economy benefits from it. The 2019-20 Federal Budget is a perfect example of this type of budget, and here, we analyse it along with the proposed 2020-21 budget, which is to be passed in October 2020.
The 2019-20 budget is described as an election budget given that the year was an election year the budget reflected in the policies contained in the budget which seeks to build a more robust economy where the future of all Australian is secured. Due to this, the budget focused on various policies that will provide essential services for Australians. Such include strengthening medical care through massive health funding, setting up about 80,000 apprenticeships to equip citizens with skills, higher funding for schools to improve quality of education, making aged care more accessible for senior citizens, among many others.
Another core aspect of the budget was the lowering of taxes. There was an immediate reduction in tax by up to $1080 or $2160 for middle and low income earning individuals or couples. The goal of this reduction was to ease the high cost of living. However, this was not restricted to individuals as medium and small scale businesses too were given the relief options with the instant write-off. The eligibility conditions for the write-off was expanded to give more business access to this tax relief on their commercial purchases. All these tax cuts are expected to be funded by ensuring that big business and multinational corporations do not avoid tax in any way.
The infrastructure was also not left out with $100 billion invested in transport infrastructure over the next ten years. It is believed that such an investment will help to reduce congestion and ease movement. Sustainable and reliable energy projects focused on creating alternative energy is also part of the significant infrastructure earmarked in the budget.
With all these policies and spending, it was projected that the 2019-20 budget would have a surplus of $7.1 billion. However, the COVID-19 pandemic has changed the narrative as the Budget now has a deficit of about $184.5 billion as at July 2020 due to the various relief measures and stimulus packages put in place to help the economy recover and mitigate hardship on the citizen. This number is further expected to rise to $220 billion as more stimulus are unveiled while revenue recovers at a slower pace than was projected. A forecast of -2.5% in the current financial year gives an idea of what to expect in terms of economic growth in the next financial year and how the 2020-21 federal budget will manage this.
In conclusion, the 2020-21 budget which is expected to be passed in October will only come with an increase in government spending in a bid to support the economy and close the gap left by the drastic reduction in private spending.