The Federal Treasurer has released the 2020-21 Mid-Year Economic Fiscal Outlook (MYEFO) in which he indicates the Australian economy is rebounding strongly since the 2020-21 Federal Budget was released. In particular, around 80 per cent of the 1.3 million people who lost their jobs or were stood down on in April are now back at work. The Federal Treasurer has also announced new policy measures in this year’s MYEFO. These measures build on the Economic Recovery Plan and commitments announced in the 2020-21 Federal Budget and include the following:
Extending the JobSeeker Coronavirus Supplement
The Government is providing $3.2 billion to extend the availability of the JobSeeker Coronavirus Supplement at a rate of $150 per fortnight from 1 January 2021 to 31 March 2021. This includes the continuation of the current $300 per fortnight income free area, the 60 cents in the dollar taper test for additional income and the current revised partner income testing arrangements at 27 cents in the dollar taper for additional partner income.
This MYEFO includes $1.0 billion in new investment in aged care, building on the $4.1 billion in new funding to the aged care sector announced since the 2019-20 MYEFO. $851 million is being provided for an additional 10,000 home care packages, which increases to 50,000 the number of additional home care packages available since the release of the Royal Commission into Aged Care Quality and Safety’s special report.
The Government has also responded to the recommendations of the Royal Commission into Aged Care Quality and Safety’s special report on COVID-19 and is continuing to respond to COVID-19 in aged care, investing $147 million, including funding for new items on the Medicare Benefits Schedule to improve access to psychological treatment and allied health services in residential aged care.
The Government will provide $1.5 billion over two years from 2020-21 to secure a further 61 million doses of potential vaccine developed by Novavax and Pfizer/BioNTech. This is in addition to the University of Oxford vaccine. The Government has confirmed that it is no longer proceeding with purchases of the University of Queensland/CSL vaccine because of issues identified during phase 1 trials.
COVID-19 vaccine investments will provide access to a total of 114.8 million potential vaccine doses.
Up to $241 million in additional funding to continue its support for the residential construction sector by extending the HomeBuilder program to 31 March 2021. The property price caps for new builds in New South Wales and Victoria will be increased to $950,000 and $850,000 respectively.
The Government’s record 10-year transport infrastructure investment pipeline was accelerated and expanded to $110 billion in the 2020-21 Budget. The Government is committing a further $506 million over three years for priority transport infrastructure to support local jobs and the economic recovery.
The Government will support the continuation of key inter-city and regional routes and smaller regional airlines through COVID-19. This includes extending the Domestic Aviation Network Support Program, guaranteeing major domestic air routes until the end of March 2021. The Government will also pay 50 per cent of domestic air services charges for key operators from January to end March 2021.
COVID-19 Consumer Travel Support Program
The Government will provide $128 million for a one-off targeted grant program to support travel agents. Payments will be scaled, with a minimum of $1500 for a business with a turnover of $50,000, up to a maximum payment of $100,000 for a business with a turnover of up to $20 million. The Government recognises that many travel agents continue to process refunds for consumers who have cancelled travel, at the same time as they manage ongoing uncertainty about international travel due to the impacts of COVID-19.
The 2020-21 MYEFO also includes new measures under the JobMaker Plan to create a stronger, resilient and more productive economy.
These additional targeted measures are welcome and should be of assistance in moving the Australian economy and community towards recovery from the pandemic emergency.
The MYEFO figures show that the Australian economy is in a much better position than expected when the 2020/21 Federal Budget was released on 6 October 2020. This appears to be mainly because Australian businesses have bounced back at a stronger rate than expected with substantially less reliance on JobKeeper than as forecasted in the Budget.
The increased price of iron ore will also help with Australia’s economic recovery for the 2020/21 year but the Government is not expecting this to continue into 2021/22 as it expects the forecasted iron price to drop back to $55 per tonne by the September quarter of 2021.
While the 2020/21 MYEFO figures paint a better picture than was in the 2020/21 Budget, the Government’s MYEFO commentary indicates there is still much uncertainty in the Australian economy and particularly in the global economy.
In the lead up to the 2021/22 Federal Budget, the Federal Government should take the opportunity to consider genuine tax and other economic reforms that will make it easier for Australian businesses to proposer through and after the pandemic.