While the Greens are calling for more spending on JobSeeker rather than faster income tax cuts, Mr Frydenberg argued the best budget measures for young Australians were tax cuts to encourage spending and job creation.
“The labour market scarring is real and the experience of young people being out of the workforce for a long time is hard,” he told The Sydney Morning Herald and The Age.
“It’s Treasury’s forecast that people entering into the workforce are expected to earn 8 per cent less in their first year in work and 3.5 per cent less after five years in the workforce as a result of this crisis.
“And that’s if they have a job. So young people are being hit particularly hard, and our focus is very much on getting young people into a job.”
Mr Frydenberg rejected criticism from economists and community groups that faster income tax cuts would not do enough to lift the economy because people would save the money rather than spend it.
The government last year legislated income tax cuts worth $158 billion over a decade and is poised to bring forward the benefits in Tuesday’s budget along with spending measures and the business investment allowance.
Grattan Institute household finances program director Brendan Coates has warned some of the tax cuts could end up being saved by those on higher incomes.
Mr Frydenberg said the high savings rate this year was due in part to social restrictions caused by the pandemic.
“People have been forced to save. But if you look at retail trade values, they are coming back,” he said.
“You’re actually putting more money in their pockets [with tax cuts]. They can’t spend it all today, but they will spend it, so that savings ratio will come down.
“The second thing is the philosophical point, which is we as a government don’t tell Australians how to spend their money.”
Mr Frydenberg warned unemployment always rose quickly and fell slowly, saying it went “up the elevators and down the stairs” and caused problems that took years to repair.
“In the 1980s recession, it took six years to get unemployment below 6 per cent, which is where it started,” he said.
“In the 90s recession, it took 10 years to get unemployment below 6 per cent, where it started.
“So we are really focused on how we get unemployment back below that 6 per cent, where we started, as quickly as possible, recognising that this has been a massive supply and demand side shock.”
Mr Frydenberg said the budget would show the Victorian lockdowns had wiped two percentage points from the national economy in the September quarter and could do more damage without federal assistance.
Mr Frydenberg said he wanted Premier Daniel Andrews to offer swift support for the new infrastructure projects to be revealed in the budget on Tuesday night.
“The expectation is that the Victorian hit to national GDP in the September quarter is about two percentage points, so it’s up to around $14 billion,” he said.
“Now, that’s without our extra budget spending.”
David Crowe is chief political correspondent for The Sydney Morning Herald and The Age.