The tax agenda is now central to the October budget as the government argues that economic growth is the best way to deal with a surge in commonwealth gross debt to $851.9 billion by June.
“We will be doing everything we can to get people back into jobs and ultimately to grow the economy,” Mr Frydenberg said.
“The pathway to growing the economy is through skills programs, infrastructure investment and tax reform.”
The federal deficit is tipped to reach $184.5 billion this year, in a staggering turnaround from the $11 billion surplus the government forecast for the same period before the last election.
Prime Minister Scott Morrison said the deficits could not be avoided and would increase debt to levels not seen since World War II.
“The alternative would have seen not only hundreds of thousands of Australians become destitute, it would have seen thousands of Australians die,” he told the Nine Network.
The unemployment rate is forecast to climb to 9.25 per cent by the end of December, suggesting another 240,000 people will be out of work given the 7.4 per cent unemployment rate last month.
Labor treasury spokesman Jim Chalmers said the government offered “no new ideas” in the update to deal with the pandemic and recession.
“They told us that unemployment will keep rising, but they didn’t tell us what they will do to respond to that,” Mr Chalmers said.
The government has opened talks with union leaders and employers on industrial relations in the hope of reaching a consensus by September, but any changes would take time to flow through to the economy.
Tax reform is seen as a faster way to add to growth, with Mr Frydenberg considering whether to bring forward personal tax cuts that are due to start in 2022 and 2024 in two stages worth $143 billion over a decade.
“We are the party of lower taxes,” Mr Frydenberg said when asked about making faster cuts. “Of course, we will look at those issues in accordance with our budget processes.”
Asked again on ABC TV on Thursday night, the Treasurer said the government was “constantly looking at our options” and argued the tax cuts already legislated could help the economy by boosting aggregate demand while keeping the progressive nature of the tax system.
Liberal MP Jason Falinski, one of a large group of backbenchers who support faster personal tax cuts, welcomed the Treasurer’s comments and said the tax system needed to be fairer, simpler and more efficient.
“The greater the incentive to work the better,” Mr Falinski said.
The tax cuts due to start in 2022 would be worth $1080 a year to a worker with a taxable income of $80,000, while the 2024 tax cut would be worth another $1955 a year.
Australian Council of Social Service chief Cassandra Goldie has called for more help for those who have lost jobs rather than faster tax cuts, while Greens leader Adam Bandt called for more spending to boost employment rather than the “trickle-down orthodoxy” of tax cuts.
Deloitte Access Economics director Chris Richardson said the JobKeeper and JobSeeker payments offered a good boost to the economy because recipients were likely to spend all the cash, but he said there was a case for income tax cuts as well.
“The chances are a chunk of the tax cut would be spent, but not all of it would be spent,” he said.
“So it wouldn’t be the first thing I would do, but I would be happy for them to do it if it is over and above everything else.”
Mr Richardson said the budget update confirmed that business investment was under far greater pressure than household spending, with non-mining investment forecast to fall 19.5 per cent this year.
The Business Council of Australia redoubled its calls for a 20 per cent investment allowance to give employers a tax break on their spending on plant and equipment.
“It’s impossible to generate the economic and jobs recovery we need off the back of the dire forecast business investment levels,” said BCA chief Jennifer Westacott.
“A 20 per cent investment allowance would give business an added incentive when confidence is at historic lows. Investment is the key to recovery. Without it you can’t create jobs, you can’t get business back on track.”
The government sees the allowance as a potential way to help employers in the October budget, while Labor put forward the same concept at the last election.
“Without going into specific measures, certainly we are focused on the sorts of incentives that we can provide to business to invest more, to bring back investment and to ensure they can hire more Australians into the future,” Finance Minister Mathias Cormann told Sky News on Thursday.
Ernst & Young chief economist Joanna Masters said the economy needed reform to lift productivity as well as spending on infrastructure.
“We’re going to need more traditional fiscal spending to support aggregate demand – so a bring-forward of income tax cuts, I think that’s helpful,” she told Sky News.
Grattan Institute chief Danielle Wood described the update as a “missed opportunity” for new stimulus measures to boost the economy.
David Crowe is chief political correspondent for The Sydney Morning Herald and The Age.