Droughts, fires, floods and now a pandemic. The Australian people have experienced disaster after disaster in the last 18 months, with much of this seemingly concentrated in the last 6 months. The scale and devastation is as significant as it was unexpected. One disaster or crisis you can plan for, but so many in quick succession has tested the mettle of our communities, as well as our State and Federal governments to respond with both feet on the ground and funding to support those affected.
Looking at the Morrison Government alone and we see that billions of dollars has already been allocated to support recovery and research – with an imminent $10b stimulus package to be released later this week to include one-off payments and concessions to small businesses. More likely to come in the Federal Budget in May. In fact, stimulus and support for the economy is inevitable as the intense bushfire season has scared international tourists away, and those that would come, can’t, as the world attempts to contain coronavirus. This doesn’t just impact on the flow of people, but the flow of produce, livestock and products. We should expect to see focus on the education sector, tourism and hospitality, and hopefully initiatives around supply chain security.
While not exhaustive, what has been committed to so far?
- March 2020 – the Morrison Government is set to release a $10b stimulus package – likely to include one-off payments to pensioners, part-pensioners and the unemployed, as well as other tax incentives and concessions for small businesses.
- February 2020 – the Morrison Government fast tracks $2m in funding for coronavirus vaccine research.
- January 2020 – the Morrison Government committed to at least $2bn in funding for bushfire recovery – supporting primary producers, mental health, children, wildlife, charities, financial counsellors and local governments.
- September 2019 – $100m in drought aid – helping to overhaul the Farm Household Allowance Application processes, support payments, local infrastructure projects and financial counselling services.
- March 2019 – multibillion dollar package to support flood-afflicted graziers in north Queensland – establishing a livestock industry recovery agency, low-interest loans and grants.
Far reaching consequences
A Moody’s economist suggested in January 2020 that the economic damage to Australia from the bushfires alone is likely to exceed the $4.4bn record set by the Black Saturday blazes in 2009. Oxford Economics suggested only last week that the global cost of coronavirus could result in $1.1tn in lost income. We are part of a global network, reliant on trade and tourism. Our economy will need time to recover.
I think it is fair to say that come Budget night on 12 May 2020, Australia won’t be announcing a surplus – and I doubt anyone would criticise the Government for this. However, there is money coming out and no money coming back in. Redirecting funds between essential services will only result in someone, somewhere missing out. It’s not sustainable, and additional funding has to be found somewhere.
What may happen on Budget night is the announcement of a series of one or more levies to continue to fund the recovery process for Australian communities impacted by natural disasters as well as to provide a buffer for industries brought to a stand-still as we quarantine ourselves against disease. We recognise that The Prime Minister ruled out a bushfire levy in January of this year, however, the additional burden of coronavirus might require a change of tact. With 85% of Federal revenue coming from income tax and GST, this would be a swift way to supplement current and any new funding commitments. There are many precedents for this – the Medicare levy has been around since 1975 and continues to support our healthcare system.
Delay tax cuts?
Another way that the Morrison Government can offset the strain on the Federal Budget is to delay some of the proposed income tax cuts for both companies and individuals. While not ideal, this may be a necessity. However, it has been argued that, much like interest rate cuts, these tax cuts would assist in stimulating the economy.
Where will the cuts be made?
Unfortunately, the funding has to come from somewhere – and with so many individuals, communities and industries in need, it is difficult to pinpoint exactly where cuts can be made that won’t undermine the services and systems already in place. Short term pain to the hip pocket may be the least painful option as we support and rebuild after a string of disasters.