Delivering an economic update in place of what was due to be the federal budget, Treasurer Josh Frydenberg said gross domestic product (GDP) was expected to fall more than 10 per cent in the June quarter, representing the biggest fall on record.
“At $50 billion, this is a loss equivalent to the total combined quarterly production of South Australia, Tasmania, the Northern Territory and the ACT,” he said.
Business investment is expected to contract by 18 per cent, while household consumption is expected to be around 16 per cent lower.
Mr Frydenberg said that while the economic data was “sobering”, the government would be looking at overhauling the tax system to encourage growth.
“The proven path for paying back debt is not through higher taxes, which curtails aspiration and investment, but by growing the economy through productivity-enhancing reforms,” Mr Frydenberg said.
“Reskilling and upskilling the workforce; maintaining our $100 billion, 10-year infrastructure pipeline; cutting red tape to reduce the cost burden on businesses and the economy; and tax and industrial relations reform as a means of increasing our competitiveness.”
BDO tax partner Mark Molesworth said tax reform would have to be executed swiftly.
“It should be expected that the tax system also needs to adapt. This can be done by taking a good, hard look at reforming our tax system; not just adjusting the current levers but actually contemplating the hard decisions relating to capital gains tax, tax concessions, GST rate and base, hybrid mismatch rules and superannuation,” Mr Molesworth said.
“Reform must be done swiftly — which has been the case before, as shown by the implementation of GST inside an 18-month time frame.”
Repaying the stimulus measures
Mr Frydenberg said there was no escaping the need to repay the $230 billion in stimulus measures it had allocated in response to the COVID-19 crisis.
“Australians know there is no money tree,” he said.
“What we borrow today, we must repay in the future.
“Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.”
The $130 billion JobKeeper payment has now been taken up by 835,000 businesses employing 5.5 million workers.
Likewise, over 450,000 small and medium-sized businesses have now received over $8 billion as part of the cash-flow boost measure.
Around $10.6 billion in superannuation has also now been released to over 1.29 million applicants, with an average withdrawal of $8,000.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.