Treasurer Josh Frydenberg delays spending cuts and austerity measures in Budget

Treasurer Josh Frydenberg will delay the ugly side of budget reform — spending cuts and austerity measures — until after the federal election pledging to first get the unemployment level down to pre-pandemic levels.

Mr Frydenberg will outline his budget strategy in a speech on Thursday indicating tax cuts and an unemployment rate below 5 per cent is central to his fiscal strategy. The unemployment rate is currently 5.6 per cent.

That also means the Morrison Government will be able to delay outlining the painful measures that may be required in the future to repair the budget until after it has contested the next federal election.

“I want to be very clear. This Government’s core values have not changed,’’ Mr Frydenberg said.

“We remain committed to lower taxes, containing the size of government, budget discipline and guaranteeing the delivery of essential services.

“COVID-19 has had an unprecedented impact on our levels of government debt. As it has elsewhere around the world.

“Using the Government’s balance sheet to limit the economic cost and longer term scarring stemming from this crisis, was a responsible and prudent response.”

But Mr Frydenberg is pledging there will not be any “sharp pivots towards austerity” in the May 11 Budget.

“We need to continue working hard to drive the unemployment rate lower [and] that is what next week’s budget will do,” Mr Frydenberg said.

“We will not move to the second phase of our fiscal strategy until we are confident that we have secured the economic recovery. We first want to drive the unemployment rate down to where it was prior to the pandemic and then even lower. And we want to see that sustained.”

In the pre-budget speech to be delivered in Canberra, Mr Frydenberg will argue that the “unusual and uncertain times” call for a flexible approach.

“We recognise the COVID-19 pandemic is far from over, and we know that some businesses and sectors are still doing it tough,’’ he said.

“But we won’t be undertaking any sharp pivots towards ‘austerity’.”

The Morrison Government’s strategy of “temporary, targeted, proportionate” measures to respond to the pandemic was a significant factor in the economy’s strong bounce back.

“We were determined to avoid the high cost of prolonged unemployment from past recessions. In the 1980s recession the unemployment rate rose from around 5 per cent to over 10 per cent and took over eight years to recover,’’ Mr Frydenberg said.

“In the 1990s recession the story was the same – with unemployment rising from around 6 per cent to over 11 per cent and taking nearly 10 years to recover.

“In stark contrast, following this recession, we are on track for the unemployment rate to recover in around two years.”

Labor’s treasury spokesman Jim Chalmers said the Morrison Government should be judged on what it delivered.

“Of course they should be more ambitious on full employment, we’ve been saying that all along, but they don’t have a credible plan to actually achieve it,’’ he said.

“The recovery would be stronger if Scott Morrison hadn’t bungled the vaccine rollout and the Budget would be in better nick if the Liberals and Nationals hadn’t wasted so much money on rorts.

“It’s remarkable that the Treasurer has had to publicly rule out austerity measures – austerity should never have been on the table in the first place.”