Unemployment is expected to reach 9 per cent by Christmas while the budget deficit returns to World War II-era levels, the Treasurer has forecast in an economic update.
In this morning’s pre-budget economic update, Treasurer Josh Frydenberg has revealed that the Morrison Government’s massive stimulus programs will leave a $85.8 billion hole in the 2019-20 balance sheets before blowing out to $184.5 billion in 2020-21.
According to the federal treasurer, the coronavirus economic downturn will cost the budget $32.4 billion in 2019-20 and $72.2 billion in 2020-21.
This is attributable to the government’s coronavirus economic support, which has seen the deployment of $289 billion in both fiscal and balance sheet support – the equivalent of 14.6 per cent of Australia’s GDP.
He cited the nation’s economic strength going into the crisis as having “given us the firepower to respond during this crisis”.
“The actions we have taken have saved lives and livelihoods.”
Unemployment is also expected to rise to 9.25 per cent in the December quarter as almost a million Australians lose their jobs, but Treasurer Frydenberg did state that support measures have saved 700,000 jobs.
Gross debt levels are also on the way up: It’s estimated that at the end of the 2019-20 financial year, gross debt was around $685 billion, while net debt was $488 billion.
This is expected to swell to $850 billion by the end of the 2020-21 financial year, while net debt will reach $677.3 billion.
Mr Frydenberg also noted that tax receipts have also fallen, with a predicted shortfall of $31.7 billion expected for the 2019-20 financial year.
This is expected to climb to more than $63 billion in 2020-21.
The Federal Government was widely expected to deliver its worst budget deficit in 70 years before this morning’s announcement.
According to Monash Business School’s Professor Mark Crosby, the update simply confirms “what we’ve known for months”.
“The forecast budget surplus is no more and instead we have one of the largest deficits in history due to the government’s COVID-19 response.”
But, it led the academic to query: “Should we care what the deficit is given we’re in the midst of a pandemic?”
More to come.