Signs of improvement in federal finances
The federal government’s mid-year economic and fiscal outlook (“MYEFO”) documents show some improvement in the federal finances in just the two months since the 2020-21 Budget, including the prospect that the Australian economy will indeed grow, by 0.75 percent, in 2020-21.
In addition, Treasury forecasts that the underlying cash balance for 2020-21 will be a deficit of $197.7 billion, an improvement of $15.9 billion since this year’s Budget.
Federal government net debt is not estimated to grow to beyond 43 percent of gross domestic product (GDP) between now and a peak in 2023-24. This is a much more sustainable position than is the case in several other highly developed economies.
Read KPMG’s analysis of the Mid-year economic and fiscal outlook 2020-21 announcement.
For additional commentary, read KPMG's analysis of the Federal Budget 2020 which took place on the 6th October 2020.
A stark economic picture, but a pragmatic and proportionate policy response.
The Federal Government’s July Economic and Fiscal Outlook (“July EFO”) documents show just how deeply the Australian economy has been affected by the COVID-19 public health crisis over the last six months. Additional outbreaks over the last month have contributed further to the uncertain outlook for the coming months.
The Australian economy is expected to decline overall by 3.75 percent in calendar 2020. Reduced receipts and commencement of a program of $289 billion in fiscal and balance sheet support contributed to the federal budget for the 2019-20 financial year being in deficit to the tune of $86 billion, compared to a forecast in last December’s Mid-Year Economic and Fiscal Outlook (“MYEFO”) papers of a surplus of $5 billion. Treasury forecasts that the deficit for 2020-21 will be a much larger $185 billion.
Read the KPMG analysis of this announcement on 23 July 2020.
On 1 May 2020 the Treasurer signed the Legislative Instrument (LI) Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No.2) 2020 (Rule Modifications) which brings about some welcome changes to the Rules of the JobKeeper program. The Treasurer had signed off on the original Rules on 9 April.
On the same day the Commissioner of Taxation published Practical Compliance Guideline PCG 2020/4 on how the Australian Taxation Office (ATO) will administer the integrity provisions in the JobKeeper legislation, which empower the ATO to reduce an employer’s JobKeeper payments where there are contrived circumstances.
Read KPMG's summary of the Rule Modifications and Discretions as they pertain to the JobKeeper Update.
Since the National Cabinet announced the Mandatory Code of Conduct (the Code) for eligible SME commercial tenancies on 7 April 2020, the State and Territory Governments have made various announcements on measures to support tenants and landlords.
These announcements outline a range of support measures that are being implemented under the Code, as well as a number of additional measures (including measures applying to residential tenancies).
Read the KPMG analysis of the relief for tenants and landlords announcements current as of 12 May 2020.
Parliament has passed the legislation, to enable JobKeeper payments to flow to employers from the start of May, and the Treasurer has published Rules governing eligibility for the payments, which as of 8pm remain in draft form. This bold plan, expected to cost $130 billion over a six month period to September 2020, will see an estimated 6.5 million workers receive a minimum payment of $1,500 per fortnight to assist them in bridging the financial challenge caused by COVID-19.
Read the KPMG analysis of this legislative announcement on 8 April 2020.
In its latest update the Federal Government has announced a JobKeeper Payment for around six million Australian workers. It represents a strong response to the prospect of our economy going into hibernation to deal with the COVID-19 health crisis.
Again, the overall policy response to COVID-19 has been proportionate on a step-wise basis. The colloquial “bridge to the other side” is being built by government, regulators, businesses and individuals, and this additional piece to the ‘puzzle bridge’ acts more like a bearer that anchors the bridge from both sides of this heath crisis.
Read the full analysis of the KPMG response to the announcements as of 30 March 2020.
Based on Treasury’s draft Rules as at 8pm on 8 April 2020.
The Federal Government’s announcement of further economic support measures, backing-up its 12 March stimulus package and the Reserve Bank of Australia’s action, will have some cushioning effect among the Australian community as we strive to contain the public health crisis.
Today’s package (22 March 2020), is nuanced in its approach as it needs to be considered in combination with the suite of support measures already announced, and importantly it is designed to enable businesses to self-determine the support they need – whether it be cash flow support from government or private sector funding support from banks – over the period of this crisis.
The support mechanisms developed by the Federal Government are temporary, scalable and flexible, and seek to be proportionate in the event additional fiscal firepower is needed in the future. This is a sensible approach as it may be that the Federal Government’s ‘bridge to the other side’ will need to be widened in the coming weeks as additional support measures are necessary.
The measures announced today amount to a further $66.1 billion in Federal Government support, bringing the total over the last two weeks to around $189 billion, including the fiscal measures announced on 12 March and various financial liquidity support measures (including those of the Reserve Bank of Australia). This represents around 10 percent of GDP.
Read the full analysis of the KPMG response to the announcements as of 22 March 2020.