Dire decision could smash the economy
Treasurer Josh Frydenberg has hit back over warnings his decision to slash JobKeeper today by $300 is a big mistake that will smash the economy.
Respected analysts Deloitte Access Economics have criticised the decision as premature today, suggesting it will create a "cash crunch" for the economy.
"The emergency Band-Aids are starting to come off - a little earlier than we'd have liked," Deloitte's Chris Richardson said.
"So both families and businesses are set for a big cash crunch between now and end-March 2021 as emergency responses run out: as JobKeeper and JobSeeker are dialled back, as money from early access to superannuation dries up, and as a range of mortgage and rent deferrals run out."
For some cash-strapped companies, there are even predictions it will force bosses to sack staff and force them to rely on unemployment benefits to survive.
Deloitte Access Economics is also predicting the deficit to double with the Budget $198.5 billion in the red in 2020-21.
The Morrison Government recently reported a final Budget outcome for 2019-20 of $85 billion. The Budget was originally forecast to be tracking towards a modest surplus before the COVID-19 pandemic.
Deloitte expects the Budget deficit will then reduce quickly to $45 billion in 2021-22 and then to $26 billion in 2022-23.
Treasurer Josh Frydenberg said today the Budget will focus on creating jobs amid speculation a new 'JobMaker' subsidy will offer incentives to employ new staff.
This is a shift from the policy in the early stages of the pandemic to pay companies' wage subsidies but only for existing full-time or long-term casuals.
"The Morrison Government will continue to support Australians through COVID-19 and next week's Budget will focus on our economic recovery and creating jobs to secure Australia's economic future,'' he said.
Mr Frydenberg stressed that Australia's JobKeeper scheme was generous and involved unprecedented investment.
"As Deloitte states, 'if our economy gets better, then the Budget will too', and that is why our renewed fiscal strategy focuses on bringing hundreds of thousands of more Australians back to work which will underpin a stronger medium-term fiscal position," he said.
But he declined to engage with the substantive criticism that it's too early to reduce the JobKeeper subsidy when millions of Melburnians remain in lockdown.
In July, Labor leader Anthony Albanese argued for a slow "tapering" or reduction in JobKeeper before the subsidy is removed.
At the time, he did not stipulate how much it should be reduced by or when it should be reduced.
But Mr Albanese is now arguing that it is the wrong time to reduce the JobKeeper subsidy in light of Melbourne's second wave and tough lockdown.
"We're smack bang in the middle of a pandemic, and in the grips of a recession. If there was ever a moment to help people, it's right now,'' he tweeted on Monday.
"Australians deserve a government that fights for them every day - not one that seems determined to leave them behind."