Budget 2020 – Big spending announced but will it hit the mark?

Craig Macalister

At the Budget 2020 announcement today, the government announced the establishment of its centrepiece - a $50 billion COVID-19 Response and Recovery Fund. A lot of high-level spending announcements were made, but there was a dearth of detail in the government’s spending promises.

The COVID-19 Response and Recovery Fund is designed to provide investment towards:

  • Protecting existing jobs.
  • Creating new jobs.
  • Providing support for workers to retrain.
  • Providing support for businesses to survive.
  • Targeted support for those sectors most affected by the virus.

Investments totalling $13.9 billion have already been made from the fund to fight COVID-19 and cushion the blow. Today, the government agreed to a further $15.9 billion of investments to continue the immediate response and kickstart the economy, leaving $20.2 billion remaining for future investment on a yet-to-be-determined basis.

The $15.9 billion announced today will be invested in:

  • $4 billion business support package with $3.2 billion targeted for the wage subsidy extension.
  • $3 billion infrastructure investment and 8,000 public house build programme to boost productivity and create jobs.
  • $1.6 billion for trades and apprenticeships training package.
  • $1 billion environmental jobs package.
  • $3.3 billion new funding to strengthen core services including health and education.

While it’s good to see funding for creating and retaining jobs, falling through the cracks of Budget 2020 are people who have lost their jobs. People that were previously employed in sectors such as tourism, accommodation and related businesses but whose employer could not keep them in employment, will miss the benefit of the wage subsidy.

For those people, a lump sum payment paid directly to tide them over until the economy starts to recover and jobs become available, would have been welcomed.

Wage subsidy extension

The Budget announcement also included some high-level information on the extension to the wage subsidy scheme.

The subsidy will be open for applications for a 12-week period and will be paid as an eight-week lump sum to employers at the same weekly rates as the current wage scheme. Other core features include:

  • From 10 June 2020, businesses that have suffered, or expect to suffer, revenue loss of at least 50 percent for the 30-day period prior to the application date versus the nearest comparable period last year, will be eligible for the extension of the scheme.
  • High growth and new firms will also be eligible.
  • The Government is also expanding eligibility to the Wage Subsidy Scheme to include pre-revenue R&D start-up firms that are recognised by Callaghan Innovation.

Applications for the wage subsidy extension for businesses that are 50% down on revenue for the 30 -day period prior to the application date versus the nearest comparable period last year will open from 10 June, with special rules for start-ups.

The eight-week lump sum is a welcome extension, but the issue remains as to what happens after that? Businesses that miss this threshold but need cash flow to survive have been left to fend for themselves, putting further jobs at risk.

A lot of businesses are currently limping along with the benefit of the wage subsidy - effectively “zombie businesses”. To be able to stand on their own again, real economic activity is required to provide the resources they need to survive.

For assistance or further advice on any of the announcements made today, please contact the Crowe Tax Advisory team, who will be happy to assist.

Crowe has developed a Government Stimulus Health Check and free Business Wellbeing Toolkit to help businesses manage potential risks and take full advantage of eligible stimulus assistance. Book your Health Check here.


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