- The government will amass more than $184 billion in debt as it tries to combat the economic impacts of the coronavirus crisis.
- Providing its budget update on Thursday, the Treasury claimed support measures had saved 700,000 jobs but that it had been unable to stop almost 900,000 layoffs.
- Assuming borders reopen on 1 January, and Victoria’s lockdown lasts only six weeks, the government hopes it can keep unemployment below 9.25%.
- Visit Business Insider Australia’s homepage for more stories.
Having run an election campaign on getting the budget “back in black”, the federal government is headed for a record level of debt as it responds to a global pandemic.
With those awful mugs now relegated to collector items, Treasurer Josh Frydenberg and Finance Minister Mathias Cormann have given their long-awaited budget update on Thursday.
Having introduced the $70 billion JobKeeper program, and essentially doubled the JobSeeker allowance during the crisis as part of $289 billion of support measures, the ministers revealed the projected budget fallout.
“This necessary and unprecedented level of economic support, coupled with declines in taxation receipts of $31.7 billion in 2019-20 and $63.9 billion in 2020-21, has significantly impacted the budget position,” Frydenberg and Cormann said.
As a result, the deficit is forecast to hit $184.5 billion this financial year, as the Morrison government tries to spend its way out of the coronavirus crisis.
“[This] has given us the financial firepower to respond during this crisis… [and] saved lives and livelihoods,” Frydenberg said, claiming the country had “performed better than almost any other nation in the world”.
That spending has become “a primary contributor” to the economy, adding 4.25% to the real economy as money flows from the workers and households and back into the economy,
What it won’t do is smooth over all of the bumps in the road. While claiming its programs had saved 700,000 jobs, so far, 870,000 jobs were lost between April and May. More pain is on the way, the government has warned, with unemployment forecast to peak at 9.25% by Christmas, before sitting above 8% going into the new year.
With JobKeeper and JobSeeker to taper off, the figures point to hundreds of thousands of Australians joining the unemployment line still.
It could also get much worse. The government’s optimism relies on some key assumptions that the government simply can’t guarantee. Specifically, the expectation that Victoria’s lockdown will last just six week and that Australia’s borders will begin reopening from 1 January.
With neither a given at this point, Thursday’s budget update is understandably little more than today’s base case.
If Australia’s progress faces further setbacks, those numbers will look a lot more like wishful thinking.
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