“The tax cuts are in three different stages, and we are considering the timing of those tax cuts, and any announcements would be made in the budget,” he said.
“It is fair to say these are very substantial reforms.”
The economy had its biggest quarterly contraction since records started being collated in 1959 and, together with the 0.3 per cent drop in the March quarter, almost $35 billion in economic activity has been lost since the start of the coronavirus pandemic.
Annual growth contracted by 6.3 per cent which, based on academic economists estimates, was the worst annual result since 1931.
If brought forward, tax cuts would flow to households who in the June quarter slashed their spending by a record 12.1 per cent. Expenditure dived on transport services by 85.9 per cent, on hotels, cafes and restaurants by 56.1 per cent and on health by 20.2 per cent.
It was the lowest amount spent in a three month period by the nation’s households since December 2013.
While spending collapsed, household savings soared to 19.8 per cent, the highest level since 1974, which had the previous record quarterly drop in GDP.
The business sector also suffered, with private capital expenditure falling by 6.9 per cent. It would have been worse but for a small lift in the mining sector with iron ore and gold prices lifting through the quarter.
Investment in housing fell by 7.3 per cent, the weakest this sector has been since 2000 when the introduction of the GST and the dotcom bust slowed the economy.
Net exports added a full percentage point to growth, but this was due to imports dropping more than Australia’s sales to overseas markets. Government spending added another 0.6 percentage points with much of that through direct support of the health sector.
State final demand, which measures the domestic side of state economies, revealed NSW had suffered the biggest hit from the coronavirus recession. Its state final demand fell by 8.6 per cent in the quarter, taking it back to where it stood in 2015.
All states and territories went backwards, with Victoria down by 8.5 per cent while Western Australia’s domestic economy contracted to its December 2010 level.
Prime Minister Scott Morrison said the government wanted to see the private sector drag Australia out of recession.
“It will be paved with the endless effort of Australians and their enterprising spirit and restoring and building their businesses, whether they are a home-building business, a construction business, whether they are are a transport business, aviation, or retail, or whatever it is,” he said.
But shadow treasurer Jim Chalmers said the government was failing to explain how it would grow the economy and cut unemployment, which is expected to reach 10 per cent by year’s end.
“Cutting pensions, cutting wages, cutting JobKeeper, cutting JobSeeker, pointing the finger and shifting the blame is not going to grow the economy and create jobs for more Australians,” he said.
Former Labor treasurer Wayne Swan, who oversaw the economy during the global financial crisis, accused the government of not being prepared to spend on traditional stimulus measures, saying the country faced a “bathtub-shaped recovery”.
Victoria’s stage four lockdowns have weighed on the economy through the September quarter with the federal Treasury expecting either another contraction or a flat result.
Westpac chief economist Bill Evans said the high household savings rate would offset to some extent the withdrawal of government support in the final months of the year, backing the idea of earlier tax cuts.
“The bringing forward of already legislated income tax cuts is an appropriate action in the current environment,” he said.
HSBC Australia chief economist Paul Bloxham said he believed a lift in economies outside of Victoria would be enough to offset its drag on GDP.
“Beyond that, our working assumption is that Victoria is able to re-open its economy by the December quarter and that there will be a stronger pick-up in national GDP from that quarter onwards,” he said.
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Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.