ANZ’s Fiscal Estimates

ANZ believe that "direct fiscal stimulus worth around A$180bn over the four year forecast horizon is our estimate of the policy plans in Australia's upcoming round of federal, state and territory budgets for 2020-21. We think another A$80bn of Commonwealth recurrent spending (or revenue forgiveness), A$60bn of Commonwealth capital spending and A$40bn of state (recurrent plus capital) spending are reasonable estimates of the fiscal stimulus to come. The key focus will be jobs growth, with governments willing to spend until they are confident of reaching their jobs recovery targets. Some "bridge building" funding to low and middle income earners in the short term, designed to soften the impact of Victoria's shutdowns and the fiscal cliff, seems likely in the December and possibly March quarters. We expect the federal government to bring forward the A$13.6bn of tax cuts that were due to start on July 2022 to January or July 2021. Media speculation suggests the A$18.5bn of tax cuts planned to start on July 2024 will be front loaded as well. Governments are ready to move to growth enhancing, having now largely completed, income-protecting measures. That means the Commonwealth will enhance business investment incentives, add to its direct infrastructure spending (probably through state grants) and may inject equity into government business enterprises. There will also be reforms aimed at promoting productivity growth. State spending will be a mix of income support, tax relief and stimulus for specific projects. Governments will keep responding to conditions as they evolve, so we will continue to recast our fiscal outlook, particularly around labour market developments."