Josh Frydenberg has abandoned the coalition’s budget repair strategy as he prepares a big spending federal budget.
The treasurer is promising to stimulate demand through government spending in his October 6 budget to help create jobs and investment.
“That may be in the form of incentives for business to invest, that may be in the form of other initiatives, bringing forward infrastructure,” he said on Thursday.
“There are a range of measures we are taking which is putting more money into the economy, helping to support jobs.”
Mr Frydenberg will signal the major shift in fiscal policy in a speech to the Australian Chamber of Commerce and Industry later on Thursday.
Old assurances about returning to surplus will be dropped, with most economists predicting the budget will show a deficit of more than $200 billion.
“It’s going to be sizeable but it reflects the challenge that we face,” Mr Frydenberg said.
“We had no other option but to provide this economic support to the people who need it most and as a result, Australia has fared so much better than other countries through this economic crisis.”
The speech will outline a two-step strategy that offers financial support during the coronavirus recovery before rebuilding the budget while keeping taxes low.
A key plank of the plan will be maintaining the existing cap on taxes as a share of the economy, which is 23.9 per cent.
Mr Frydenberg insists the goal remains to claw Australia out of debt in his lifetime.
“But we know the economic shock has been like no other,” he said.
“Australia has fared a lot better than other nations but there’s still a big hole in the economy.”
The treasurer is also promising an overhaul of bankruptcy laws to make it easier for small businesses to stave off administration.
Companies with liabilities of less than $1 million will be able to stay in control of their businesses.
The federal government expects a massive amount of company closures when emergency insolvency measures expire at the end of the year.
Mr Frydenberg said the insolvency changes would not hit the budget bottom line but would help businesses trade out of the economic crisis.