Australian Finance Minister Mathias Cormann on budget announcements

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SINGAPORE – After providing initial support to an economy reeling from the coronavirus pandemic, the Australian government is now focusing on the strength of the recovery, Finance Minister Mathias Cormann told CNBC on Wednesday.The government announced its budget a day earlier including billions of dollars in personal tax cuts for middle-income earners, job creation and job stimulus programs, and temporary tax incentives to get businesses back to investing. Australia’s budget deficit is expected to be AUD 213.7 billion ($ 151.8 billion), or around 11% of GDP, in the current fiscal year and is expected to narrow to around 1.6 % of GDP in the medium term.

“Having provided the initial crisis support to cushion the blow on the economy, on jobs and on working families, what we are doing now is investing in the strength of our economic recovery to move forward Cormann told CNBC’s “Squawk Box Asia”.

“Yes, it’s a big deficit in an Australian context, but we entered this crisis in a comparatively stronger fiscal position,” he said, adding that even after the announcement of planned spending and measures In fiscal support, Australia’s debt in GDP remains significantly lower than that of other advanced economies.

When asked whether companies, in the face of global uncertainties, would accept the government’s offer and kick start their investment process, Cormann was optimistic. He said Australia’s economic fundamentals were strong before the pandemic hit and the country is in Asia-Pacific, a part of the world that is expected to generate the bulk of global economic growth in the decades to come. .

” We are [an] An open and internationally competitive business economy and we provide incentives through the tax system in a time bound manner in order to truly trigger these decisions by companies to advance investment decisions, to invest in future growth and success, ”he told me.

One of the measures includes an instant asset write-off for companies with sales of less than A $ 5 billion, which is around 99% of companies.

“At the end of the day, we all want more jobs, but jobs don’t grow on trees, they are created by profitable growing businesses and that’s why we want businesses to invest in their growth and success. futures now, ”added Cormann. He also said the government expects to recover budgeted money over the medium term through higher profits and taxable income.

In the announced budget measures, Australia is expected to provide AU $ 4 billion over three years to accelerate job growth. The government will pay companies up to A $ 200 per week if they hire young Australians, whose job prospects have been affected by the recession.

Analysts at the National Australia Bank said that if there was no problem with the government’s focus on stimulating the economy using fiscal stimulus, “structural reform would also have been useful ”. They added that the issue of future debt is of little concern in the short term as the economy “needs all the help it can get from fiscal policy.”

Interest rates are already at an all-time high of 0.25% and, although the Reserve Bank of Australia may cut rates slightly, that would have a marginal impact at the moment, according to NAB analysts. “The cost of credit is not the problem – it’s more the lack of demand for credit. “

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