Debt up in Budget, as migration losses weigh on growth

Government defends rising debt burden

The Federal Government has defended rising public debt levels forecast in this week’s Budget, with net debt estimated to reach $980 billion in 2024-25. While the current year’s Budget deficit is down by more than $50 billion on the $213 billion deficit forecast in October 2020, budget deficits are projected for the next four years. Prime Minister Scott Morrison said dealing with the Covid-19 pandemic was “economically 30 times worse than the global financial crisis”, resulting in a Government economic recovery plan and response of more than $300 billion.

Tax break for medical, biotech patents

Medical and biotechnology companies will be encouraged to invest via a patent box tax concession announced in the Federal Budget. From 1 July 2022, the patent box will tax income derived from Australian medical and biotech patents at a 17 per cent effective concessional corporate tax rate. Corporate income is normally taxed at 30 per cent or 25 per cent for small and medium companies. Budget papers have costed the tax concession at $100 million a year, from 2023-24. Only granted patents, which were applied for after the Budget announcement, will be eligible. The Government said it would consider whether to extend the patent box concession to the clean energy sector.

Treasury downbeat on migration return

Federal Treasury has taken a cautious stance on the return of temporary and permanent migrants to Australia. Budget papers assume a gradual return to occur from mid-2022, with small phased programs for international students to begin only from late 2021. Treasury also forecast a net migration loss of 97,000 people by the end of 2020-21 and a further loss of 77,000 in 2021-22; it admitted that the weak outlook for population growth would weigh on the outlook for real GDP growth.

Limited room for international visitors

While the immigration door remains shut, Australia is still receiving short-term international visitors and returning residents. In March, the Australian Bureau of Statistics recorded 8,320 visitor arrivals, chiefly from New Zealand, the United States and the United Kingdom. A total of 9,250 residents returned from overseas, mostly from NZ, India and the US. Pre-Covid, Australia was receiving more than one million each of returned visitors and short-term visitors a month.

Retail trade down in March quarter

Retail turnover in Australia fell in the March quarter, reflecting the snap Covid-19 lockdowns that occurred in some states in the first three months of the year. Figures from the Australian Bureau of Statistics show that retail trade fell a seasonally-adjusted 0.5 per cent, following a rise of 2.4 per cent in the December quarter. On a monthly basis, however, the retail sector recorded a rise of 1.3 per cent in March, with food and household goods recording falls, but turnover in department stores up by 8.5 per cent.

Liberals claim narrow victory in Tasmania

Premier Peter Gutwein has finally claimed victory in the Tasmanian state election held on May 1, narrowly securing the 13th and final seat of the 25 Lower House seats. It is the first time that the Liberal Party has secured a consecutive third term of government in Tasmania; it was returned to government in 2014.