Australia pledged billions in tax cuts and measures to boost jobs on Tuesday to help pull the economy out of its historic Covid-19 slump in a budget that tips the country into its deepest deficit on record. Prime Minister Scott Morrison’s conservative government has unleashed A$300 billion (US$215 billion) in emergency stimulus measures to prop up growth this year, back-pedalling on a previous promise to return the budget to surplus. Treasurer Josh 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 recovery plan aimed at creating one million new jobs over the next four years. Those measures are forecast to push the budget deficit out to a record A$213.7 billion (US$153 billion), or 11 per cent of gross domestic product, for the financial year ending June 30, 2021. Australia enters first recession since 1991 after pandemic takes toll on economy “There is no economic recovery without a jobs recovery,” Frydenberg said in parliament. “There is no budget recovery without a jobs recovery.” Australia’s unemployment rate hit a 22-year high of 7.5 per cent in July as businesses and borders closed due to strict lockdown measures to deal with the coronavirus. While the number of deaths and infections in Australia from Covid-19 has been low compared with many other countries, the hit to GDP has been severe. Australia’s A$2 trillion (US$1.4 trillion) economy shrank 7 per cent in the three months ended June, the most since records began in 1959. In its new projections, the government expects unemployment to rise to 7.25 per cent by the end of the current financial year and then fall to 6 per cent by June 2023. Australia’s GDP is expected to shrink 1.5 per cent for the current financial year before returning to growth of 4.75 per cent in the next. Australia will spend A$4 billion (US$2.8 billion) over the next year to pay businesses that hire those under the age of 35 as it targets youth unemployment. The budget also brings forward previously legislated tax cuts for middle-income earners and extends tax breaks for individuals offered in last year’s budget for low- and middle-income earners. Some of these cuts will be retrospectively backdated to July 1, 2020. China-Australia trade endures in fractured geopolitical environment “This new wage subsidy gives businesses certainty to hire and provides a career path,” Morrison said in a statement. Frydenberg said the subsidy is “all about helping those who are out of a job get into a job. It’s all about helping those that are in work, stay in work”. The government’s highly expansionary budget comes soon after the central bank’s policy decision on Tuesday, at which it kept interest rates at a record low and flagged reducing high unemployment rate as a national priority. Australia’s Tasmania is coronavirus-free, but reels from closed borders The Reserve Bank of Australia has slashed interest rates this year to 0.25 per cent and pumped billions into the bond market to keep credit flowing to the economy. Both the fiscal and monetary support this year has helped restore consumption and business confidence and bring the unemployment rate down to 6.8 per cent. Frydenberg has pledged to pare the heavy fiscal support once the unemployment rate falls “comfortably below 6 per cent”. Australia delayed the release of this year’s federal budget, which usually takes place in May, as the coronavirus upended most of the economic assumptions underlying its projections. While most of the measures announced on Tuesday were not new, the government affirmed its strategic priorities that include boosting domestic energy production and manufacturing and infrastructure investment. Frydenberg said the plans would “ensure Australian manufacturing plays an even greater role in our economic recovery”. Australia on Monday said it will fast track infrastructure projects worth some A$7.5 billion to support the economy.