Tax cuts no substitute for job plan: Labor

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Federal Labor says it will work constructively with the government in trying to lift the economy out of its first recession in nearly three decades. But shadow treasurer Jim Chalmers says fast-tracking legislated income tax cuts is no substitute for a jobs plan. Treasurer Josh Frydenberg is stitching together a […]

Federal Labor says it will work constructively with the government in trying to lift the economy out of its first recession in nearly three decades.

But shadow treasurer Jim Chalmers says fast-tracking legislated income tax cuts is no substitute for a jobs plan.

Treasurer Josh Frydenberg is stitching together a federal budget in the face of a whopping seven per cent collapse in economic activity during the June quarter, which confirmed Australia is in its first recession since the early 1990s.

More than one million people are already unemployed and another 400,000 could join the dole queue before Christmas.

Mr Frydenberg is planning to speed up income tax relief in the October 6 budget to breathe life into the battered economy.

“If you put more money into people’s pockets there will be more spending and more spending will create jobs,” he told the Nine Network on Thursday.

But the national accounts figures released on Wednesday show people are unable or unwilling to spend money during the coronavirus pandemic and are instead saving as much as they can.

Dr Chalmers is reluctant to pre-empt what the treasurer will bring down in the budget that has been delayed from its traditional May release because of the pandemic.

But he said tax cuts are not a substitute for a comprehensive plan for jobs.

“At the moment, the government’s plan is to wind back JobKeeper, wind back JobSeeker, freeze the pension and slash wages. That would be part of the problem not part of the solution,” Dr Chalmers told ABC television.

“We need a jobs plan, and tax cuts being brought forward on their own is not a jobs plan.”

The treasurer believes easing social and business restrictions will give people the confidence to open their wallets.

Grim unemployment projections will weigh heavily on the federal budget.

The Reserve Bank expects unemployment to reach 10 per cent by the end of the year and believes it will still be around nine per cent by the middle of next year.

But despite the pandemic dragging on longer than first expected, Mr Frydenberg still plans to scale back JobKeeper and JobSeeker support payments at the end of the month.

Labor finance spokeswoman Katy Gallagher said there needed to be a permanent rise in the rate of unemployment benefits, beyond the currently scheduled cut-off period for the supplement put in place during the pandemic.

Leading economists are bracing for a bumpy road to recovery.

New construction data shows the industry remains in deep decline, not helped by the harsh restrictions in Victoria.

The Australian Industry Group/Housing Industry Association performance of construction index fell 4.8 points to 37.9, well below the 50-mark that separates contraction in the sector from expansion.

“The sharp fall in activity in Victoria was a major factor in the downturn while border restrictions in other states have hampered builders and constructors who are reliant on interstate supplies and the availability of tradies from across borders,” Ai Group head of policy Peter Burn said.

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