SYDNEY (Reuters) – Australia’s re-elected conservative government might not meet a June deadline for tax breaks that policy makers had been counting on to give the slowing economy a much-needed boost, after Prime Minister Scott Morrison said parliament may be unable to convene in time.
The Reserve Bank of Australia (RBA) in particular would have welcomed the fillip to consumer demand as it wrestles with whether to cut interest rates from already record lows.
If the tax breaks are delayed, maybe for months or even a full year, it would add to the case for at least one cut in the current 1.5% cash rate, perhaps as early as next month.
The tax rebates were a much-touted pledge from Morrison during the election campaign and may have played a part in his surprise defeat of the opposition Labor party.
Morrison’s Liberal National coalition had promised tax rebates to around 10 million middle- and low-income earners from July 1 worth up to A$1,080 per person.
It was to be paid once they lodged their tax returns for the financial year to the end of June.
However, to take effect the tax package has to be passed by lawmakers by the end of June and parliament cannot be recalled until the official writs from Saturday’s election are returned.
That turns out to be an extensive process of vote checking which might not finish until late June, giving little time to pass the laws.
“We obviously have to wait for the writs to be returned and there’s a formal process for that,” Morrison told Sky News. “At the moment, that’s not looking until very late into the back end of June.”
“So, that really does make very narrow that opportunity to do it before 30 June,” he added. “I think that’s very unlikely, with the advice I’ve received.”
Any delay to the rebates would be badly timed for the economy given that annual growth in the March quarter likely slowed to its lowest since the global financial crisis at under 2%.
The first-quarter growth numbers will be released on June 5, a day after the RBA holds its next policy meeting where a cut in rates is certain to be discussed.
Economists had estimated the tax breaks would inject about A$7.5 billion ($5.18 billion) into the economy over 2019/20, lessening the need for a reduction in interest rates.
(Reporting by Wayne Cole; Editing by Michael Perry)