Australian Treasurer Josh Frydenberg said on Thursday morning that the country’s recovery from the first recession in three decades will “take years.”
He said the economic fallout of the coronavirus crisis will be felt for a long time in Australia, but the government would be “ambitious” in the upcoming budget, which was delayed because of the pandemic, for financial year 2020/2021 despite the grim outlook.
Frydenberg told Australian Broadcasting Corporation (ABC) television channel that the recovery is going to “take years,” but people are starting to get back to work because of the government’s record investments.
“You’ve already seen an unprecedented level of support, and the focus has been to date on fiscal policy.”
“The reason being is that monetary policy is largely exhausted. During the Global Financial Crisis, interest rates were able to be cut by around 425 basis points. That was the equivalent of injecting into the economy 100 billion Australian dollars (73.2 billion U.S. dollars) over a 12-month period.”
“We don’t have the luxury of movements on monetary policy to boost demand. It has to be done by fiscal policy, and that’s what we’re undertaking right now,” he said.
His comments came after the Australian Bureau of Statistics (ABS) revealed on Wednesday that Australia’s Gross Domestic Product (GDP) fell by a record 7 percent in the June quarter as households and businesses slashed spending amid the pandemic.
It marks the first time that Australia has entered a recession since 1991.
The economy is expected to contract again in the September quarter as a result of strict coronavirus restrictions reimposed across Victoria state in July and August.
Responding to the ABS data on Wednesday evening, Prime Minister Scott Morrison told the parliament that the recession was an “awful and heartbreaking blow” to Australians and their families all around the country.
Frydenberg told Nine Entertainment newspapers on Thursday that the government was considering bringing forward 158 billion Australian dollars (115.8 billion U.S. dollars) in personal income tax cuts.
“The tax cuts are in three different stages, and we are considering the timing of those tax cuts, and any announcements would be made in the budget,” he said.
In addition to federal government schemes to bolster the economy, state governments have flagged their own initiatives.
Premier of South Australia state Steven Marshall said on Wednesday that he will announce a fast-response economic stimulus to the recession after the Reserve Bank of Australia (RBA) urged states to do more to create jobs.
“We obviously have our budget that is coming up in November, and there will be further stimulus and support put in place there,” Marshall told News Corp Australia.
“We have got to move much faster. People can expect that there will be further significant support provided to our economy in the lead-up to the State Budget.”