During this challenging time which is pandemic related I thought I would give my take on what the situation may be and where we go as a nation from here. As I do, this it is important for me to say that this is an a-political assessment based on my experiences over many years and going through previous recessions. Of course none as bad as the current Covid19.
The deficit of $215b and net government debt of more than $700b looks overwhelming, however, I see some reasons for us to not descend into panic mode.
The fight back out of recession is what Australians are good at and we already know that jobs are at the core of a healthy economy including recovering from this recession.
We also know that creating jobs will earn incomes and part of these incomes will pay taxes and by spending what is left over keeps businesses open so they can pay taxes to the government out of profits. They can also grow and employ more staff who in turn earn wages and pay tax on those wages.
Getting back to the debt and although this is a huge number, the Australian economy is also huge by comparison and our debt to GDP is much lower than every other advanced economy around the world.
We should also know that the interest being paid on our debt is less than 1% which is really cheap money.
In looking at the creation of jobs, which in turn lowers the forecast unemployment rate of 8% in December to 6% in another 2 years, there is plenty of encouragement for us through the incentives designed to keep re-employment pumping.
- JobKeeper keeps going until the end of march 2021
- For those businesses not on JobKeeper, they can obtain a hiring credit of $200/week by adding an eligible under 30 year old to their staff and $100/week for those 30-35 year old new employee.
- Financial losses this year can be offset against profits in the past 2 years and if they have already paid taxes on past profits, they will be entitles to a refund once the losses have been offset against them
- Immediate new assets can be written off against tax immediately instead of over a few years
All of these incentives support economic growth through additional employment. All we have to do is feel positive that as Australians we can once again innovate and contribute to the claw back of prosperity that we are renowned for.
The government didn’t cause this recession it was the pandemic. The balanced federal budget that was projected before the pandemic placed Australia in a strong position to get through Covid19.
This is not a time to politicize the debt and deficit or to play party politics and blame anyone.
We need bi-partisan politics including a coming together of unions, statutory bodies, local councils and representative associations now to work cohesively to make Australia the envy of the business world.