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PODCAST: What the Budget may bring

06:16pm September 24 2020

Prime Minister Scott Morrison (left) with Treasurer Josh Frydenberg in the House of Representatives. (Getty)

Having worked as an economist for several decades, Bill Evans has seen his fair share of federal budgets.

But none, not even the budgets during the last recession in the early 1990s, which Evans recalls “went on and on”, have as much anticipation surrounding them as this year’s set of numbers and policies due on October 6 amid the COVID-19 pandemic.  

Ahead of the budget, Evans this week predicted the Reserve Bank would also cut rates to just 10 basis points on budget day in a fresh “team Australia” moment, adding extra suspense and drama to the first Tuesday in October. 

“It's a very seductive concept,” Evans, Westpac’s long-time chief economist, tells Westpac Wire in a podcast previewing the budget. 

“I think what they've decided is that…in order to be a credible supporter of fiscal stimulus, they need to be seen to be doing as much as they possibly can do.” 

In the podcast, Mr Evans also discusses what he expects in the budget, the benefits of personal income tax cuts, the superannuation guarantee, the outlook for house prices and risks surrounding higher debt levels. 

“Governments around the world are going to be accumulating a lot of debt. But the cost of that debt is extraordinarily low, so governments can manage the interest burden of that debt very easily,” he says. 

“However, having said that, the biggest worry, and that's the worry with MMT as well, is that inflation might be out there somewhere. And once inflation starts to rear its ugly head and central banks that think they know how to deal with inflation by raising interest rates get moving, then that's when the cost of managing the debt becomes a big issue.

“I can't say what that shock might be, but of course sitting back here a year ago, no one unpredicted COVID either.” 

The information in this article is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness with regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed.

Michael Bennet was inaugural Editor of Westpac Wire from June 2017 to December 2021. He joined Westpac after more than 12 years in journalism, most recently at The Australian as the national newspaper’s banking reporter based in Sydney. Michael has worked at various News Corp publications and other media companies covering industries including financial services, resources, industrials, markets and economics. He is originally from Perth, Western Australia, where he also wrote across magazines covering the arts with a focus on music.

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