Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
The Hon. Josh Frydenberg MP
Deputy Leader of the Liberal Party
Federal Member for Kooyong
Date: Thursday, 23 July 2020
TREASURER: Well good morning, I’ll make some opening remarks, followed by the Finance Minister, I’ll then go through some slides, and then we’ll be happy to take some questions. In December last year, the Finance Minister and I stood together in this building and delivered the Mid-Year Economic and Fiscal Outlook. It followed the first balanced Budget in eleven years, the largest legislated tax cuts in more than twenty years and welfare dependency was at a thirty year low. Australia’s economy was growing and jobs growth was strong. Today we stand here in a very different world. Australia and the world are now experiencing the most severe economic crisis since the Great Depression. What is primarily a health crisis has devastated economies worldwide. In the last 40 years, the global economy has contracted only once. That was when it contracted by just 0.1 per cent in 2009 during the GFC. The OECD is now expecting that the global economy will contract by six per cent this year. The IMF, the International Monetary Fund is expecting 157 economies to contract this year with unprecedented falls in many. The United States is expected to contract by around eight per cent and the euro area by around 8¾ per cent. The coronavirus crisis has led to unprecedented economic support, to the tune of around $11 trillion. Here in Australia, the Morrison Government has deployed $289 billion in fiscal and balance sheet support, the equivalent of 14.6 per cent of GDP. Our economic strength going into this crisis has given us the financial firepower to respond during this crisis. The actions we have taken have saved lives and livelihoods. Australia has performed better on the health and economic front than almost any other nation in the world. The impact of the coronavirus has led to a significant decline in tax receipts and a large increase in Government payments. This has driven a dramatic change in the Budget’s position. These harsh numbers reflect the harsh reality we face. The economic outlook remains very uncertain. Recent events in Victoria are testament to this, a painful reminder how a setback in combating the virus can impact the speed and the trajectory of our national economic recovery. In the economic numbers released today, Treasury are forecasting real GDP to have fallen by seven per cent in the June quarter, with household consumption, dwelling investment, business investment and exports all expected to fall as a result of the COVID crisis. Real GDP is expected to fall 3 ¾ per cent in calendar year 2020, but grow by 2.5 per cent in calendar year 2021. In financial year terms, real GDP is expected to have fallen by a quarter of a per cent in 2019/20 and 2.5 per cent in 2020/21. During this crisis, fiscal support will be a primary contributor to GDP. Treasury estimate that the fiscal support has increased the level of real GDP by three quarters of a per cent in 2019/20 and will increase the level of real GDP by 4 ¼ percent in 2020/21. Treasury has based their assumptions on Victoria being in lockdown for 6 weeks from 9 July, after which restrictions are progressively eased. Other states are assumed to be gradually opening up, in accordance with the plan agreed by the National Cabinet on 8 May. One of the largest impacts of this crisis is its effect on the labour market. Between March and May, 870,000 jobs were lost and more than one million Australians saw their working hours reduced, in many cases to zero. These are mums and dads, sons and daughters, friends and colleagues. And at 7.4 per cent in June, the official unemployment rate is expected to peak at around 9¼ per cent in the December quarter this year. Without the Government’s economic support measures, unemployment would have peaked at five percentage points higher. The Government’s economic measures have saved 700,000 jobs. And as we move to the next phase of this crisis, our JobMaker plan will get Australians back into jobs. As part of our JobMaker plan we have already announced a $2 billion JobTrainer skills package, an extension of our 50 per cent wage subsidy for apprentices and trainees and the creation of a national fund for job seekers to reskill and upskill, a Higher Education relief package that will subsidise short courses in critical areas like nursing, teaching and science to help Australians get back into work as quickly as possible. We have also announced $2 billion for priority infrastructure shovel-ready projects to support local jobs and a HomeBuilder package that will support an additional $1.6 billion in dwelling investment in 2020 and 2021. Deregulation and a more flexible industrial relations system, including the continuation of the temporary changes we have made in response to the crisis will be central to our plan for jobs. The coronavirus has had a significant impact on the budget bottom line. Our fiscal measures have been worth $164 billion, equivalent to around 8.3 per cent of GDP. Of this, and this is a critically important point, 99 per cent of our spending is over the two financial years 2019/20 and 2020/21. Our measures have been temporary, they’ve been targeted and they have helped maintain the structural integrity of the budget. This includes the $86 billion JobKeeper program which is today supporting 3.5 million workers, or thirty per cent of the pre-COVID private sector workforce. The $16.8 billion coronavirus supplement has also been important to cushion the blow for more than 2 million Australians who are on income support. The Morrison Government has also delivered two cash payments of $750 for more than 3 million pensioners, a $31.9 billion cash flow boost for 760,000 small and medium sized businesses and $9.4 billion for additional health measures for personal protective equipment, expanded telehealth services and boosting Australia’s hospital and pathology capacity. Every resource available to the Government has been marshalled to defend the nation against the coronavirus. As a result of the coronavirus, tax receipts have been revised down by $95.6 billion of which $31.7 billion is in 2019/20 and $63.9 billion is in 2020/21. Personal income tax, company tax and GST receipts are all down. As a consequence of lower receipts and higher payments the deficit is estimated to be $85.8 billion or 4.3 per cent of GDP in 2019/20 and $184.5 billion or 9.7 per cent of GDP in 2020/21. These deficits reveal the real cost to the Budget of protecting lives and livelihoods as a result of the coronavirus. The pandemic has also led to a sharp increase in Australia’s Government debt. Gross debt was $684.3 billion or 34.4 per cent of GDP at 30 June 2020 and is expected to be $851.9 billion or 45 per cent of GDP at 30 June 2021. However, with a debt servicing cost of 0.8 per cent of GDP in 2019/20 owing to historically low interest rates, our debt burden remains manageable. Net debt is expected to be $488.2 billion or 24.6 per cent of GDP at 30 June this year and is expected to be $677.1 billion or 35.7 per cent of GDP at 30 June next year. Despite our increased debt levels, they remain lower than what many comparable nations went into this crisis with. The average debt to GDP ratio for major advanced economies is now expected to exceed 100 per cent in 2020. Australia’s strong fiscal position has seen our AAA credit rating reaffirmed by all three major credit rating agencies during this pandemic and we have been singled out by the IMF to be the only developed economy to have its economic outlook upgraded this calendar year. Australia is experiencing a health and economic crisis like nothing we have seen in the last 100 years. Tragically 128 Australians have lost their lives as a result of COVID-19. And as we stand here today more than 5 million of my fellow Victorians are in lockdown. Our economy has taken a big hit and there are many challenges we confront. We can see the mountain ahead and Australia begins the climb. We must remain strong, we must draw strength from our resilience as a nation and a people. And we will get through this and we will get through this together. Mathias.
MATHIAS CORMANN: Thank you very much Treasurer.
We are here today presenting a very challenging set of numbers.
We all know why we are here in this position. Overwhelmingly, we are here because of the massive fiscal impact of the coronavirus pandemic. Because of the high cost of our necessary crisis level support for our health system, our economy to protect and support jobs, and because of the significant impact of the economic hit on our revenues, our expenditures and our Budget bottom line.
So yes, we find ourselves in a very challenging fiscal position, but we need to keep things in perspective. We are in a better, stronger, more resilient position than most other countries around the world.
Australia has outperformed nearly every other country when it comes to health, economic and fiscal outcomes. We are in a better, stronger, more resilient position as a result of the Budget repair work that was done under our Government over the first six and a half years that we were in government.
The decisions we made prior to this crisis have improved our budget position by more than $250 billion over the 10 years to 2022-23 and have put us on a better, more sustainable fiscal trajectory for the future as we went into this crisis. If we had not done that, we would have had less fiscal capacity to respond and our economy would have been less resilient.
We have been working through the impact of this crisis on our economy, businesses and jobs, in an orderly fashion.
First there was the immediate crisis response, protecting lives and livelihoods, including the critically important JobKeeper and enhanced JobSeeker measures. Second, we continued to work on a sensible transition, as close as possible back towards normal, while the virus remains with us, supporting the economy and jobs where required and laying the foundations for a strong recovery. Relevant decisions, many of these decisions that had to be made very quickly in the first few months of this year, are reflected and reconciled in this update that we are representing to you today.
Thirdly, we will keep building on our many measures to keep and create more new jobs as part of our five-year plan to maximise the strength of our economic and jobs recovery with our focus on tax incentives for businesses to invest, deregulation, skills development, workplace relations reforms, infrastructure investment, our free trade agenda and much more.
We are doing all of this against the backdrop of an economic and fiscal outlook which remains highly uncertain. That’s why we are presenting 2-year numbers in this Update. By the time of the Budget in October, which we delayed for a reason, we will be in a position to provide all the relevant forecasts and projections over the entire forward estimates and over the medium term.
In the Budget, we will also reflect the next instalment of our comprehensive five year plan to maximise the strength of our economic and jobs recovery on the other side.
But let me repeat the most important point this morning. Yes, Australia finds itself in a very challenging fiscal position as a result of the impact of the coronavirus crisis and pandemic here in Australia. But we are in a better, stronger, more resilient position than just about any other country around the world and that gives us a very strong foundation from which to build the recovery on the other side.
TREASURER: Thank you Mathias. I’m going to go through some slides. So this first slide just gives you a sense of where the active cases are globally, there are more than six million active cases globally. More than half of the new cases are coming from just three countries. The United States, Brazil and India. And what's interesting is if you look at the number of active cases per one million people, Australia is at 156. 156 active cases for every one million people. In the United Kingdom, it’s 3,700 active cases for every one million people. In the United States, it’s 7,700. In Sweden, it's 7,100. It just reflects the reality and the perspective that we need to bear in mind, even with our second wave of cases in Victoria. Next Slide. So the number of daily cases has increased by 1.6 million over the last week. And the point of this slide is just to emphasise that we're not out of the woods yet, that the daily rate of increasing in cases is three times globally what we saw in April. So the intensity and the number of cases has increased. Next slide. This is the global growth numbers. And what you can see from this is that over the last 40 years effectively, the global economy has grown every year except one which was in 2009 when the global economy was just down 0.1 per cent. This is Treasury's forecast for the global economy to contract by more than four per cent over the course of this year. Next slide. The next slide details Australia's relative performance in terms of GDP growth forecasts by the IMF for major advanced economies. And quite clearly here, Australia's performance is a lot better than what we're seeing around the world. To put it in perspective, the United States is seeing a contraction this calendar year of around eight per cent. The United Kingdom, around 10 per cent. France, around 12 per cent. Next slide. The next slide reflects what is happening in this calendar year here in Australia. Now, what we've seen is in the June quarter, an expectation that growth will be down by 7 per cent, but importantly growing in the September quarter by 1.5 per cent. And in terms of what is going to be happening in 2020, the expectation is that the economy here in Australia will contract by 3¾ per cent, but will grow by 2.5 per cent next year. Next slide. This is a key slide in terms of what is happening to the economy as a result of our economic support, and what we do know is that our economic support, which Mathias and I have talked about today, $289 billion, $164 billion of which is direct support, $125 billion of which is balance sheet support. What that will see is a contribution to growth in 2019 of about three quarters of a per cent and a contribution to growth in 2021 of about 4 and a quarter per cent. Next slide. Now, this is a critical slide because this is pointing to what is happening to unemployment. As you can see, it starts to climb, being above 9 per cent in the December quarter and then coming back down, but still remaining at elevated levels into early next year. But without the Government's economic support, unemployment would have been five percentage points higher, so the Government's actions have saved 700,000 jobs. Next slide. You would have heard us talk a lot about the effective unemployment rate. The official unemployment rate’s at 7.4 per cent, the effective unemployment rate is at 11.3 per cent. The effective unemployment rate takes into account that people are either on zero hours or have left the workforce. What's important here is the effective unemployment rate and the official unemployment rate will start to converge. They'll start to converge as restrictions are eased, less people are on zero hours, more people are going back to work. But the official unemployment rate will continue to rise throughout the course of this year. Next slide. This is the underlying cash balance, $85.8 billion, $184.5 billion, they’re our deficit numbers for 2019/20 and 2021, reflecting our measures that we have taken with the coronavirus, but also the parameter variations, both on the receipt side and the payment side. Obviously, the revenue is not what it was and what it was expected to be, because consumption is being lower, business earnings have been lower, but also on the payment side, obviously, more people are on welfare, so there's more payments being made. Next slide. This is where payments and receipts as a proportion of GDP. Mathias and I and the Prime Minister and the whole Government knows how much hard work was done to reduce the rate of spending growth since we came to Government. But as a consequence of what has transpired with COVID-19, you're seeing payments as a proportion of GDP climb to nearly 34 per cent, you're seeing receipts as a proportion of GDP come down as a reflection of the size of the economy. These are the international comparisons of net debt, 2019/20, 2021. Pointing out as I was saying earlier, our net debt ratio is much lower than other countries. I think the critical point here is among those G20 countries, the average increase in net debt to GDP is 18 percentage points. In the United States it's even higher at 23 percentage points. It reflects the fact that we went into this economic crisis with more balance sheet flexibility. Next slide. This is the final slide. This is gross debt and interest cost. This goes to the cost of our debt, even at elevated levels. And as the Governor of the Reserve Bank has recently said, five year money is available at 0.4 per cent, 10 year money at around 0.9 per cent. So because of the historically low interest rates, our ability to manage the interest bill can be seen as a proportion of GDP at these elevated debt levels our interest bill will be $16.3 billion per year. And that is based on that public debt interest cost as a proportion of GDP. Yes Lanai? Questions.
JOURNALIST: Treasurer, we know that mining investment is helping to prop up the economy. Can we expect any measures in the October 6th budget that reduce red tape or create tax incentives for the resources sector? And we know that a lot of the capital in mining comes from China. So how important do you see your relationship in continuing the business relationships with China amid the current political tensions?
TREASURER: Sure, I’ll say a few things. I'm sure Mathias will, as a proud Western Australian, because Western Australia's been such a strong aspect of our mining sector for so long. And you're right, it is one of the bright spots with mining investment improving and it's off the back of continued high demand. I mean, the iron ore price, we had it in MYEFO at $55 a tonne and it's approached around $100 a tonne. And that's a reflection of some of the supply constraints in Brazil, but also the continued demand out of China. In terms of incentives for mining investment, as you know, we outlined in the early stages of our coronavirus response two major incentives for business, the Instant Asset Write-Off, which we have extended to items and multiple items, up to $150,000 that can be written off immediately, multiple items. And then we also announced the 50 per cent accelerated depreciation initiative for businesses with a turnover of up to $500 million. Now, these initiatives are designed to boost investment, to bring forward investment that would have otherwise been maybe delayed because of the uncertain economic environment, that 50 per cent accelerated depreciation initiative goes out to June next year. What I'd also say about deregulation, because obviously that's a very big focus for us. And what we're trying to do is streamline the approvals processes. And we've got a bilateral relationship now going with Western Australia. Ben Morton is doing work on that, designed to fast track without compromising at all the environmental requirements and the environmental standards - fast track, some of these projects.
MATHIAS CORMANN: Our resources sector has been an incredibly important sector underpinning the strength of our economy through this crisis. One of the early decisions that our Government made, working with relevant State Governments, is to keep the resources sector operating through this crisis and to find ways to keep the resources sector operating in a way that was COVID safe. There is no question that much of the resilience of our economy through this period has been underpinned by the ongoing strong performance of the resources sector. Moving forward, we will want to maximise investment across the economy. We want to see the resources sector continue to perform strongly. We want to see investment across the board. We want to provide incentives and encouragement to businesses across the board to invest in their future growth and success so they will hire more Australians again. That is going to be very much our focus.
TREASURER: Just a second, let Mathias finish.
MATHIAS CORMANN: On China, we have an important mutually beneficial relationship with China and we will continue to ensure it is in the best possible shape moving forward.
TREASURER: Thank you. Fiona? We’ll get around.
JOURNALIST: Treasurer, given the uncertainty and everything that we're seeing, what level of confidence can you have in any projections?
TREASURER: Well forecasting is difficult at the best of times, let alone in the middle of a pandemic. And I note that one fellow member of your press gallery, Chris Uhlmann, described forecasting at this time as putting your finger up in the cyclone and trying to take the wind speed. I mean, it is really difficult. Treasury have I think, done an excellent job in the circumstances. And obviously we work with our international counterparts around many of the global assumptions. But in terms of the domestic economy, obviously how we manage future cases of the coronavirus will be absolutely key to the economic recovery, both its speed and trajectory. So that is why, learning from the lessons and experiences in Victoria will be absolutely critical, because there will be more cases and how we manage those effectively will affect our recovery.
JOURNALIST: Given the situation in Victoria, the tax incentives the Finance Minister speaks of, the budget no doubt more measures in the budget spending measures, coronavirus supplement for the JobSeeker, possibly past December, possibly another instalment of JobKeeper past March. It's highly likely this will be a higher deficit than $184 billion won’t it? And are we in a situation where we're probably not going to see a surplus for a decade in this country now?
TREASURER: Well, these numbers reflect the harsh reality that we find ourselves in. But it's really important to keep emphasising the fact that the initiatives we have taken have saved lives and livelihoods. I mean, the JobKeeper programme, whether it's Lisa with her F45 gym in Indooroopilly, who said that was the way she kept her staff on and her doors open. Whether it's Michael in Gosford with his cafe, who said this was his ray of light. I mean, these business owners and their staff members are talking on behalf of millions of Australians. So what the Morrison government has done has absolutely stood by every Australian through this crisis.
MATHIAS CORMANN: What you are essentially doing is, you are making assumptions about the future, which may or may not eventuate. What we are presenting here today is not the Budget, which will be delivered on 6 October. What we are presenting to you today is the July Economic and Fiscal Update, based on a reconciliation of the costs of the measures so far and the impact of the economic hit on our Budget bottom line with our outlook over just a two-year period. The reason it is only two years is because of the points that have been made by a number of people. There is significant uncertainty. There is significant uncertainty, which means that it would not be possible at this point in time to make credible forecasts and projections beyond what we are presenting to you today.
JOURNALIST: The unemployment rate is obviously the figure that is actually going to frighten some families more than even the big numbers in terms of debt and deficit. Now, it's going to hit 9 per cent by Christmas. And we know that that's an underestimate. How many people do you think are going to be unemployed or underemployed in Australia by Christmas? Is it a lot more than 9 per cent? And if so, how much?
TREASURER: Well, that is the number we've presented today based on the decisions we've taken and based on what we know at the time. As I said, these are forecasts by Treasury. I’ve spoken about the assumptions that they have taken into account. They've taken, obviously, the developments in Victoria with the lockdown and that there would be restrictions in place but there'll be a gradual easing of restrictions until the end of the year. Of course, other states Sam, opening up, restrictions are being eased as they effectively manage the coronavirus. So last week's job numbers, where 210,000 people found a job, 60 per cent of whom were women, 50 per cent of whom were young people, was double what the market expected. So we do know that as the economy opens up and restrictions are eased, that jobs are being found. But our support and this is critical, our support is ongoing. The JobKeeper extension is a major investment in keeping people in work. It follows the Treasury review, which found that it was a very effective programme. 44 per cent of employers surveyed who use JobKeeper said it affected their decision to keep their staff on, we’re reapplying the eligibility test, but it works in alignment with the JobSeeker programme. We’re turning back on mutual obligation gradually, we’re investing heavily in skills. We're partnering with the states in that task, as well as all those other initiatives we have announced. This is a comprehensive plan. Now, we've also engaged with other third party or key stakeholders like the banks to ensure that they have the flexibility around their customers to get them through this crisis. So the extension of those loan deferrals for another 4 months are really important. The extension of our SME loan programme is also designed to help businesses at this difficult time.
JOURNALIST: One of the key assumptions in this forecast is that international borders will open on January 1 with maybe a two week quarantine period. Has a policy decision on borders therefore been made? And if not, how much certainty can we put in these numbers, given the impact borders has on migration and the entire tourism, aviation sector?
TREASURER: Well in terms of the borders, the assumptions are that it very gradually starts to come back, that the quarantine is applied, that you start potentially bringing in some international students. Now, that is work that we have been undertaking. But of course, the environment with respect to the coronavirus is very fluid. So decisions haven't been taken about start dates for that. But these are Treasury's forecasts. And as you can understand, it's a very dynamic environment. It's a very uncertain environment. And Governor Lowe made that point just a few days ago. Andrew?
JOURNALIST: To pay off this whacking great record debt you either have to…
MATHIAS CORMANN: Lower than most other countries.
JOURNALIST: Thanks Finance Minister…
MATHIAS CORMANN: Just making the point.
JOURNALIST: You have to increase your tax take or cut government spending. When can the economy…
MATHIAS CORMANN: Or grow the economy.
JOURNALIST: When can the economy afford to do either?
TREASURER: Well, it won’t, it won't surprise you that, you know, both Mathias and I would challenge the premise of your question, because what our experience has been is that we've grown the economy and we have seen spending on essential services such as hospitals and schools reach record levels. And as a process of growing the economy, the economy was 16 percent larger pre-COVID than it was when we came to government and we helped create one and a half million new jobs. Employment growth was double the OECD average, when we came to government, Andrew unemployment was 5.7 percent, and in February it was 5.1 percent. We got unemployment down. We saw in the back half of last year GDP growth coming back. And so our focus is on getting people back to work. This is the Prime Minister's JobMaker plan. He's laid it out comprehensively. It's about industrial relations reform. It's about infrastructure investment. It's about investing in skills and training. It's about cutting red tape so people can invest more time in their business than filling in paperwork. This is our focus, and we know that we can do it again, as we have done before.
JOURNALIST: Treasurer, you said the forecasts include an assumption that the lockdown in Victoria will only last six weeks. I think it’s been said that that six weeks will cost $3.3 billion. Dan Andrews flagged yesterday that if the case numbers don't fall or continue to increase, that lockdown might have to last longer. Would we be looking at another $3.3 billion, or would the hit be worse if it goes on for longer?
TREASURER: Well, again, we are making forecasts based on the decisions that have been taken as of today. And that decision has not been taken by the Andrews government. And we're very hopeful that the measures that they're putting in place indeed with the Commonwealth support, with our ADF personnel on the ground, with our Commonwealth health officials, with all the other work that we’re doing, and all the other resources that we're deploying to Victoria, that we can make inroads in that state in flattening the curve and getting the outbreak under control. I mean, these numbers reflect the decisions that have been taken. And as I said there, it's a six week lockdown which the Premier has announced, and then a gradually easing of restrictions before the end of the year.
JOURNALIST: Treasurer, what feedback are you getting from the ordinary Australian about the ramp up in debt? Is it something that makes you feel comfortable about increasing it if you need to? And also, can you just clarify the forecast price for iron ore and whether or not the big falloff in coal might take away any benefits from that?
TREASURER: Okay. Well, I’ll let Mathias speak to the iron ore forecasts. But in terms of in terms of your first question, the public's first concern is about their health. And our first concern is about the public's health. And that is why the Prime Minister has been on daily calls that Mathias and I have both joined with the chief medical officers, with the Health Minister, with the Aged Care Minister and with many others to actually work through the health challenge. We are absolutely focussed on delivering an effective health response because that's the best way of delivering an effective economic response. In terms of their other main concerns, it is about jobs. People want to maintain their jobs or to find a job in this very challenging economic climate. Three and a half million people have benefited from the JobKeeper programme, and it has worked to meet its objectives, namely saving businesses and jobs, maintaining that formal connection between employers and employees and delivering the income support. The stories that my colleagues and Mathias's colleagues hear every day from their constituents is that those programmes are working and they welcome the government's announcement. Now, the government's announcement was around the transition and a step down. It was costing us and it continues to cost us $11 billion a month to roll out the JobKeeper programme. So what we have sought to do as the economy opens up, is to step it down with a gradual reduction in the top tier payment and the introduction of a second tier payment to better reflect what people's pre-COVID incomes were.
MATHIAS CORMANN: You asked about the levels of debt as a result of where we are here today. I ask you, what is the alternative? Are you suggesting that we should not have provided the support we did to boost our health system, to protect jobs, to protect livelihoods? I mean, in the circumstances what was the alternative? The second point, and we have to really keep this in context, our debt level as a share of GDP even now is lower than the debt level as a share of GDP of many other countries around the world before we went into the coronavirus crisis. In relation to the assumptions around iron ore, in more recent times the iron ore price has been running in excess of $100 a tonne. You know that in MYEFO we assumed a reduction of the iron ore price to $55 a tonne by the end of the June quarter. Prudently we are assuming in this document that the iron ore price would decline to $55 a tonne by the end of the December quarter. We have maintained cautious and conservative assumptions when it comes to iron ore. It is well known there can be volatility when it comes to iron ore prices and so we continue to make sure that we protect the stability of our Budget settings in that context.
JOURNALIST: Treasurer will you look to increase the tax base, and how long will it take to pay back this debt?
TREASURER: We are the party of lower taxes and we've proven that. Our pathway to growing the economy is through lower taxes, not higher taxes. We went to the last election promising to legislate $158 billion worth of tax cuts. And we've done that. And one of the one of the outcomes of that legislated tax plan is that we're creating a single bracket between $45,000 and $200,000 where people pay no more than 30 cents in the dollar. Now, that will mean 94 per cent of taxpayers are paying no more than 30 cents in the dollar. Currently, it's around 63 per cent of taxpayers. So this is a dramatic transformation. Now stage one of the tax plan has already come into effect. And what it means is that if you earn between $48,000 and $90,000, you're getting a low middle income tax offset of around a $1,080. So if you're…
JOURNALIST: [Inaudible] how long is it going to take you to pay back the debt?
TREASURER: Well in terms of paying back this debt, it will take a number of years. Well, we're not putting a date on it because we want to grow the economy. And what I can tell you is we will be doing everything to get people back into jobs and ultimately to grow the economy. But the pathway to growing the economy is through skills programmes, infrastructure investment and tax reform.
MATHIAS CORMANN: Let me just add to this. Let me put this into context for you. When we delivered the 2019-20 Budget, our projection was that Government net debt would go to zero over the decade. That was our projection at the time. Clearly, now with the decisions we had to make, it will take somewhat longer, but we are not presenting you today with medium term projections. We are presenting you with two-year numbers. The next medium term projection will be provided in the Budget in October. The final point and that is to really reinforce what the Treasurer has just said. The way to get on top of this debt is by growing the economy more strongly and by creating more opportunity for Australians to get ahead, get into jobs, get into better paying jobs and get ahead. Stronger growth leads to more revenue and lower welfare payments. That is the way that we can go back to where we were. It is stronger employment growth that has helped us repair the Budget in our first six and a half years in Government and this can be achieved again.
JOURNALIST: Treasurer, well it's a question to either of you really, just if I can take you to the summary of key policy measures page and if we look at the income support for individuals, which includes the coronavirus supplement, how does it go from an outlay of $11.5 billion to a return to the budget of $834 million in the following year? What's the assumptions?
TREASURER: Well, in terms of a coronavirus supplement, it's what we've announced this week, which is that it's coming down from $550 to $250 from the end of September through to the end of the year. As we speak, it's supporting 2 million Australians. So the coronavirus supplement is gradually coming down, but it's in its place till the end of the year. And that is a cost to the budget because that's an additional cost that we have put in place.
JOURNALIST: Is it a positive return to the budget? Sorry, because I just don't understand why there's a positive return to the budget the following year?
TREASURER: I can't test that assumption because I haven’t got the page in front of me.
JOURNALIST: [Inaudible] item on page 7. I'm sorry, I'm not meaning to be a gotcha. I just don't understand.
TREASURER: Well, it's a cost to the budget because it's an expenditure item.
JOURNALIST: Treasurer just on the effective unemployment rate. Last month we saw the labour force participation rate for young people, the lowest on record since the ABA started taking this data. What is the impact to forecasts if young people just simply opt out of the labour market altogether?
TREASURER: Well, the idea is to give young people more of an opportunity to get into work. And the good news was in the June numbers, that 50 per cent of those jobs, it was 48 per cent to be precise, of those jobs that came back were for people aged 15 to 24. And that is that is a very positive sign because the sectors that were hit hardest included the retail sector, included the hospitality sector. Included the arts sector and recreation sectors. So gradually, as restrictions are eased, people are coming back into those sectors, and that means women, and that means young people who are two of the groups that have been particularly hard hit. We have a number of programmes, whether it's our skills programmes or PaTH initiatives, or what we're doing with the apprentice wage subsidy, I want to emphasise that program. I mean, providing a 50 per cent wage subsidy at a cost of $1.5 billion will help keep 180,000 apprentices in work and a lot of those are young people who were just starting off.
JOURNALIST: Treasurer, in 2014, the Government introduced a budget repair strategy to every new spending measure, and Mathias will remember this quite well, was offset by reductions in spending elsewhere within the Budget. Is that what you are going to return to? And just something separate, the debt limit at the moment is $850 billion. You go through that next year. When do you plan to increase it? And will you head towards $1 trillion?
TREASURER: I'm sure both of us want to talk on that. In terms of the debt limit, we'll revisit that in the Budget, because you're right. And the fiscal strategy as well, because clearly we're in a very difficult and different time and so requires a different approach. Phil.
JOURNALIST: [Inaudible] a series of reform measures that have already been flagged by the Prime Minister and others, how much are you hoping that these numbers today act as some sort of springboard in terms of garnering Senate support for what you might be asking and wider support amongst the voting public?
TREASURER: Well, I can tell you the first cab off the rank will be labour market flexibility and a continuation of the industrial relations reforms that accompanied the JobKeeper introduction. Now, our view is that those flexibilities that apply both to the employer and give them the ability to change duties, to change hours and to change the location of staff, should be continued, not just for those firms that meet the reapplied eligibility test but should apply to those firms who are on JobKeeper right now. 960,000 firms are on JobKeeper right now and they should be able to maintain that IR flexibility going forward. This is a discussion that the Attorney-General will have with the relevant stakeholders, because what we do know is that businesses have relied on those flexible labour market reforms to operate in this challenging environment. And it is reasonable that if you were previously working in sales in the showroom, but your shop is closed, that your employer can ask you to help in the warehouse with the stocking, something as reasonable as that, particularly as you are getting the $1,500 JobKeeper payment, is something that has benefited the workforce. So, Phil, we're looking to continue those IR flexible arrangements, but we're also looking to expand in the reforms as part of those five working groups and those five working groups cut across enterprise agreements, they look at obviously greenfield sites, casuals, compliance and award simplification. Those are the areas where we have said that will continue. Last question.
JOURNALIST: I had a question. It's going to be an incredibly difficult time for people looking to enter the labour force for the first time, whether they're younger Australians or maybe people who need to find work now because their household income has fallen so far, you’ve put in a lot of measures around JobMaker and those things, in the Treasury review, they recommended a special wage subsidy for businesses hiring first time workers. Is that something the Government would consider or is considering?
TREASURER: Well, obviously, the JobKeeper programme is providing not only income support, but it's effectively subsidising the cost of labour for businesses who are affected. Now, that's our focus. But we also have some other programmes. We have other programmes which see up to $10,000 incentives to employers to either take on older workers, but also younger workers, we have a range of existing incentives that we put in place. We'll have more to say about various initiatives around getting people back to work. I think there was a couple more questions.
JOURNALIST: Are we likely to see cuts to the public service in the budget in October given the numbers that we're seeing at the moment?
TREASURER: Special Minister.
JOURNALIST: We will be delivering the Budget in October.
JOURNALIST: [Inaudible] are we likely to try and constrain costs by cutting the public service?
MATHIAS CORMANN: What we are doing today is providing the update on where we are at, in terms of the fiscal impact of the coronavirus pandemic and the fiscal impact of the measures that we had to take to support our health system, the economy and jobs. We will be delivering the budget on 6 October and we will continue to make sensible judgements in all of the circumstances.
TREASURER: We'll take one more question. Thank you.
JOURNALIST: Treasurer, are you still looking at bringing forward tax income cuts in the October budget? And if so, is that an indication the government sees this as a need to spend it’s…
MATHIAS CORMANN: Everyone wants to talk about the budget today.
JOURNALIST: No, but to be fair you’ve talked about this before so I think it’s a valid question?
TREASURER: As Mathias said, you would all like us to deliver the budget. That will be on October the 6th. What we've delivered today is a consolidation, a crystallisation of the decisions, more than 100 different measures that we have taken since MYEFO, and obviously the numbers today paint the reality of where the economy is at. In relation to tax. I just repeat what I've said previously, which is we are the party of lower taxes. We took to the Australian people $158 billion of lower taxes, and that was endorsed by the Australian people. I don't have to tell you there was quite a contrast in the tax plans that went to the Australian people at the last election. The other side had $387 billion of higher taxes, taxes that remain on their books, whether it's housing, whether it's superannuation, whether it's on retirees, they're the taxes that they were going to hit Australians with. Could you imagine hitting Australians with those taxes at this difficult time? In contrast, we legislated income tax cuts, stage one has come in, stages two and three are still to come in. Of course, we will look at those issues in accordance with our budget processes. But I also point out that as of July 1st, three and a half million businesses benefited from tax cuts for small and medium sized enterprises. That tax cut has brought it down to 26 per cent and it will come down to 25 per cent five years earlier than was originally intended. If you're a supermarket or a pub that could be worth $7,500 a year, more money in your pocket to grow your business. The instant asset write-off, the accelerated depreciation, there's a whole lot of initiatives that we have undertaken on the tax side, which is giving people more of their money as it should be. Thank you.