Australia’s economy is expected to recover from the Covid recession in 2021 as generous tax cuts of $2,160 for average earners are brought forward.
AMP Capital chief economist Shane Oliver said backdating the tax break to July last year, beginning July 2022, will help spur consumer spending as borrowers would have more left over after paying off their mortgage.
“As people use it to pay off their mortgage faster, it helps reduce the risk of debt servicing problems,” he told Daily Mail Australia on Monday.
‘[It can] also prefer an increase in spending in the coming years.’
Australia’s economy is expected to recover from the Covid recession in 2021 as generous tax cuts of $2,445 for average earners are brought forward. Pictured are Boxing Day shoppers in Melbourne city centre
Treasurer Josh Frydenberg’s October budget was brought forward by two years and included $17.8 billion in Stage Two tax cuts originally scheduled to go into effect in July 2022.
An Australian with an average full-time salary of $89,123 a year is set to receive $2,160 in tax cuts as part of a plan to give 11 million Australian workers either a tax cut or tax equalization.
dr Oliver said that while some of the money from tax cuts would be saved, “at least a third of it is being spent, which will help the economy in the short term”.
A month after the October 6 budget, national retail sales were booming, rising 7.1 per cent in November after Melbourne’s three-month lockdown ended.
Figures from the Australian Bureau of Statistics showed the second-biggest monthly rise on record, after a 16.9 per cent rise in May, after April saw a record 17.7 per cent fall during the first full month of a national lockdown.
“We’ve seen a good recovery in economic activity across the country, you can see that in the retail sales figures released today,” said Dr. Olivier.
AMP Capital chief economist Shane Oliver said backdating the tax break to July last year, beginning July 2022, will help spur consumer spending as borrowers would have more left over after paying off their mortgage. Shown is a table comparing tax breaks for 2020-21 to 2017-18
“I don’t think we’re going to see the economy go down the drain.”
With interest rates already at a record low of 0.1 percent, the tax cuts are expected to boost economic activity, with low- and middle-income Australians earning between $40,000 and $60,000 set to get $1,060 back.
Those who make more than $100,000 will get $2,445 back.
Tax cuts will be retroactive to July 1 of last year, raising the 32.5 percent threshold from $90,000 to $120,000 and raising the 19 percent limit from $37,000 to $45,000.
A month after the October 6 budget, national retail sales were booming, rising 7.1 per cent in November after Melbourne’s three-month lockdown ended. Pictured are buyers in Melbourne
Taxpayers will receive their relief after filing their 2020-21 tax returns beginning in July this year.
Mr Frydenberg told Parliament last year the tax cuts were intended to avert an economic crisis.
“The Great Depression and two world wars have not brought Australia to its knees, and neither will COVID-19,” he said.
Australia’s economy was in recession for the first half of 2020, with the economy shrinking by a record seven percent in the June quarter.
JobKeeper’s wage subsidies, which are now $1,000 every two weeks for workers who work 20 hours or more per week, will end March 28.
Australia’s economy was in recession for the first half of 2020, with the economy shrinking by a record seven percent in the June quarter. Pictured is an Adelaide Centrelink queue in April
