EXAM CASE STUDIES Flashcards
Aggregate demand: budgetary policy 2020-21 - income tax cuts
Stage Two of the Personal Income Tax Plan
The government bought forward stage 2, set to come into effect in 2022-23.
Below are the changes that were brought forward.
• An increase in the maximum rate of the existing Low-Income Tax Offset (LITO) from $445 to $700 per annum ($37,500 or less get the maximum $700 offset)
• An increase to the income threshold for the 32.5 per cent rate from $90,000 to $120,000
•Planned removal of LMITO, though it remained
Aggregate demand: budgetary policy 2020-21 - transfer payments
JobKeeper payment extension until 28 March 2021.
- Wage subsidy paid to employers who then pay employees who have been stood down or had their hours reduced.
- Under the extension, the maximum amount eligible was $1200 per fortnight. Less than the original $1500 per fortnight maximum.
- The extension is estimated to cost $15.6bn in the 2020-21 financial year.
- Total cost of JobKeeper is around $89bn, the largest stimulus in history
- More than 3.8 million people benefitted
Aggregate demand: budgetary policy 2020-21 - business incentives
The JobMaker hiring credit incentivises businesses to employ workers between ages 16-35 with $200 a week for employment of <30 and $100 a week for >30 [only eligible for over working over 20 hours a week]
Projected to support 450,000 jobs and cost $4 billion
Aggregate demand: budgetary policy 2021-22 - Tax policy (households)
In the 2021-22 budget, the Australian government announced that the low and middle-income tax offset (LMITO) would be extended at the cost of AUD 7.8 billion.
The LMITO returns $1080 to people who reported taxable income of between AUD 48,001 and AUD 90,000.
4.5 million people will receive full offset, whilst another 5.6 million will receive partial
Aggregate demand: budgetary policy 2021-22 - Tax policy (business)
In the 2021-22 budget, the government announced $20.7 billion in tax relief through extending temporary full expensing and temporary loss carry-back.
• Temporary full expensing allows eligible businesses (turnover of less than $5 billion) to claim a 100% depreciation expense for capital assets purchased before 30 June 2023.
The Treasury expects both measures to create around 60,000 jobs and boost GDP by $18 billion by the end of 2022–23.
Aggregate demand: budgetary policy 2021-22 - government expenditure (G2)
As part of the Australian government’s record $110 billion 10-year infrastructure pipeline, an additional $15.2 billion over ten years is committed to road, rail and community infrastructure projects across Australia.
These new commitments will support over 30,000 direct and indirect jobs
$2.6bn for the North-South Corridor
$2.0bn for the Great Western Highway Upgrade
2021-22 budget outcome
Estimated deficit of $106.6 billion
2020-21 budget outcome
Revised estimates show deficit of $161 billion rather than $213 billion
2020 cash rate
Feb: 0.75%
March (cut twice): 0.25%
November: 0.10%
2021 cash rate
0.10% [emergency cash rate]
Aggregate supply policy 2021-22: Interventionist infrastructure
Melbourne Intermodal Terminal
The Australian government invests in road and rail projects across Australia, including $2 billion for the new Melbourne Intermodal Terminal.
An intermodal terminal is a location for freight transfer from one transport mode to another:
- A new intermodal terminal in Melbourne will increase the efficiency and capacity of the national and Victorian freight industry.
- It will also enable and maximise the benefits of Inland Rail by ensuring that Melbourne’s freight infrastructure can efficiently accommodate the Inland Rail service offering of double-stacked 1,800-metre trains and can meet the increased rail freight generated by Inland Rail.
Aggregate supply policy 2021-22: R&D
In 2021-22 CSIRO funding for Australia’s artificial intelligence was increased by $124 million
This is likely this will improve the efficiency of resource allocation
Aggregate supply policy 2021-22: Subsidy
Enhanced child care subsidy (CCS) program
Eligibility criteria expanded to increase funding for second and third children and support families earning more than AUD 189,000.
The enhanced CCS will reduce the cost of childcare for 250,000 families and is estimated to cost AUD 1.7 billion costs over the forward estimates
Aggregate supply policy 2020-21 (extended for 2021-22) Training and education
The JobTrainer Fund
Australian government announced in the 2020-21 budget it plans to ensure that free or low-fee training courses are available across the nation through its $1 billion JobTrainer Fund.
The Australian government partnered with state and territory governments to establish a $1 billion JobTrainer Fund.
- The Australian government will provide $500 million in 2020-21, States will match this contribution
- In 2021-22 budget, the government extended this scheme with another $500m. Bringing the total funding available for free and low fee training under the Fund to $2bn
This initial investment will provide around 300,000 additional training places that are free or low fee in areas of identified skills need such as health, aged and disability care, IT and trades for job seekers and young people, including school leavers.
Aggregate supply policy 2021-22 welfare change
The Productivity Commission’s inquiry into mental health and the National Suicide Prevention Adviser prompted $2.3 billion in funding towards the national mental health and suicide programs
The estimated cost of mental illness and suicide to the Australian economy is about $43–70 billion each year, with a further $151 billion from diminished health and reduced life expectancy.
