Australia says tax cuts to come into effect in December

FILE PHOTO: Pedestrians prepare to walk across a main road in front of a construction site in the central business district (CBD) of Sydney in Australia, November 8, 2018. REUTERS/David Gray

SYDNEY (Reuters) - Australia’s Treasurer Josh Frydenberg said on Wednesday that the tax cuts forming the centrepiece of the country’s annual budget will not come into effect until December.

Frydenberg on Tuesday announced A$17.8 billion in personal tax cuts and A$5.2 billion in new programmes to boost employment in a plan aimed at helping the coronavirus-ravaged economy by creating one million new jobs over the next four years. The bulk of the tax cuts are retrospective from July 1.

Although the legislation is on course to pass this week, Frydenberg said the stimulus would not be seen in the incomes of Australians until December.

“The advice to us ... is that people will receive the money at the end of the year,” Frydenberg told reporters in Canberra.

The timetable stokes concerns about Australia’s A$2 trillion economy being left without sufficient support. The government’s wage subsidy payments will be reduced in coming months and stop in March 2021.

“Our main concern is that the move from public to private spending will be lumpy,” ANZ Bank said in a research note.

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 begin in 2024.

Reporting by Colin Packham. Editing by Gerry Doyle