Australia rushes through tax cuts in COVID-19 economic stimulus

FILE PHOTO: Construction workers go about their day near scaffolding at a construction site in central Sydney, Australia, September 11, 2018. REUTERS/David Gray

SYDNEY (Reuters) - Australia’s parliament approved A$17.8 billion ($12.78 billion)in personal tax cuts on Friday, quickly pushing through measures announced earlier this week to support the country’s coronavirus-ravaged economy.

Looking to get 1 million people back to work, Australia’s conservative government pledged billions in tax cuts and measures to boost jobs on Tuesday, the bulk of which are retrospective from July 1.

Australia’s economy saw its worst contraction on record in the second quarter due to the coronavirus and unemployment has hit its highest in over two decades, even as the country managed to contain the outbreak better than many of its peers.

Prime Minister Scott Morrison said on Friday 11 million Australians will benefit.

“This is a plan to boost business, to boost jobs,” Morrison told reporters in Canberra. “Our plan for the economic recovery from the COVID-19 recession is moving. It’s happening. It’s law.”

Earlier this week, Australian treasurer Josh Frydenberg said the tax cuts will begin to take effect in December, stoking some concern that much needed stimulus remains weeks away.

The economy has been reliant on a wage subsidy scheme since March but this support will be reduced over the coming months before being stopped in March 2021.

Australia’s economy shrank 7% in the three months that ended in June, the most since records began in 1959, while the unemployment rate hit a 22-year high of 7.5% in July as businesses and borders closed to deal with the coronavirus.

Australia pledged to reduce the heavy fiscal support once the unemployment rate falls “comfortably below 6%”, which Frydenberg said on Wednesday would likely take place in 2024.

Reporting by Colin Packham; Editing by Ana Nicolaci da Costa