Morrison Government Abandons Cost-Cutting Economic Policy
Conservative government will abandon its long-held aspiration to return the budget to surplus, Treasurer Josh Frydenberg stated on Thursday.
Mr Frydenberg had, last year, promised budget surpluses in coming years, but on Thursday said that would no longer be the "prudent" or "appropriate" course of action.
"It would now be damaging to the economy and unrealistic to target surpluses over the forward estimates," he said in a speech to the Australian Chamber of Commerce and Industry.
The government's budget update is due on Oct 6, when Mr Frydenberg will announce a new fiscal strategy to boost jobs and growth.
The change in stance will be welcomed by the Reserve Bank of Australia, which is counting on solid fiscal stimulus to boost the economic recovery, having already slashed interest rates to a record low 0.25 per cent and launched an "unlimited" bond buying programme.
The government has so far announced more than A$300 billion in fiscal support, including a wage subsidy scheme, to cushion the economic blow from the coronavirus.
Economists are assessing that the size of stimulus must be calibrated according to the situation on the market which is now difficult with job market shrunk first time in twenty years. Some advised to provide more direct payments as the recent experience have shown that it has been the source of the stable demand for the goods and services in the last two quarters.
Australia's economy is in its first recession in three decades, with a recovery widely expected to be uneven and unemployment expected to rise to about 15 per cent in the next few months.
Mr Frydenberg said the fiscal tap will remain open at least until unemployment falls "comfortably" back below 6 per cent.