“We are all Keynesians now” is a phrase that was attributed to US President Richard Nixon. It is a grudging acceptance that in a time of financial crisis, Governments should man the pumps and spread money throughout the economy in an interventionist way. This Government largesse goes against the grain of the theory of pure capitalism, which propounds the view that capitalism, left to its free-market devices, will produce optimum economic activity and full employment.
John Maynard Keynes was an English economist that argued total spending in the economy was what drove economic activity and the demand for labour. Hence, if economic activity is down, governments should step in to increase total spending by pumping money into the economy. The conservative side of Australian politics does not naturally lean towards the Keynesian view.
But tonight, was very different.
Tonight, on 6 October 2020, Treasurer Josh Frydenberg delivered the Federal Budget for the 2020 – 2021 income year. It will be remembered as Australia’s biggest spending budget with a forecast deficit of $214 billion for the 2021 fiscal year. Hence the phrase, “We are all Keynesians now”, could be written large across current Government policies and budgets over the four-year forward estimates period. Treasury’s underlying cash balance will deteriorate by $480.5 billion over the forward estimates period.
But as the Treasurer said: “The budget is all about jobs.”
The budget papers reveal that the predictions for future deficits will be:
Predictions for Government net debt as a percentage of GDP
Predictions for the percentage unemployment rate
Individual Tax Rates
As expected, the adjustments to tax rates that were originally due for implementation in the year ending 30 June 2023 have been brought forward to apply from 1 July 2020. Here is a table of the new tax rates.
Individual tax rates for residents
2020-21; 2021-22; 2022-23; 2023-24 tax thresholds
Tax on this income
$0 – $18,200
$18,201 – $45,000
19c for each $1 over $18,200
$45,001 – $120,000
$5,092 plus 32.5c for each $1 over $45,000
$120,001 – $180,000
$29,467 plus 37c for each $1 over $120,000
$51,667 plus 45c for each $1 over $180,000
2024-25 and later years tax thresholds
$45,001 – $200,000
$5,092 plus 30c for each $1 over $45,000
$51,592 plus 45c for each $1 over $200,000
Individual tax rates for non-residents
$0 – $120,000
32.5c for each $1
$39,000 plus 37c for each $1 over $120,000
$61,200 plus 45c for each $1 over $180,000
$0 – $200,000
$65,000 plus 45c for each $1 over $200,000
Big benefits for business
The headline benefits for business include:
6 October 2020