At an economic update on Thursday, the Treasurer has painted a sombre economic outlook for Australia, revealing a budget contraction of $85.8 billion in 2019–20 and $184.5 billion in 2020–21, marking Australia’s biggest deficit since World War II.
According to Josh Frydenberg, the coronavirus economic downturn will cost the budget $32.4 billion in 2019–20 and $72.2 billion in 2020–21.
On top of this, the virus has seen the government deploy $289 billion in fiscal and balance sheet support, the equivalent of 14.6 per cent of the GDP.
“Our economic strength going into this crisis has given us the firepower to respond during this crisis,” Mr Frydenberg said.
“The actions we have taken have saved lives and livelihoods.”
Fiscal support measures alone have peaked at $164 billion, or 8.4 per cent of the GDP.
“Ninety-nine percent of that spending is over the financial years 2019–2020 and 2020–2021,” Mr Frydenberg said.
“Our measures have been temporary, they have been targeted, and they have helped to maintain the structural integrity of the budget.”
As such, Mr Frydenberg said the coronavirus crisis will see Australia’s real GDP drop 3.75 per cent in 2020, before rebounding by 2.5 per cent next year.
The Treasurer also doused hope of an employment revival by the end of the year, revealing that unemployment will hit 9.25 per cent at the end of December.
Tax receipts have seen a significant drop, too, with a predicted shortfall of $31.7 billion in 2019–20 and $63.9 billion in 2020–21.
Australia’s gross debt is also said to swell to $851.9 billion by the end of this financial year, with net debt to sit at $677.3 billion.
'Australia outperforms most advanced economies'
However, addressing the economic situation around the world, Mr Frydenberg said Australia is doing much better than most advanced economies despite these eye-watering figures.
“We can see the mountain ahead, and Australia begins the climb,” he said.
“We will get through this together.”
Mr Frydenberg stressed that had Australia not implemented the level of coronavirus support it has to date, the economic impact would have been more significant.
"The economic support in response to the COVID-19 pandemic is estimated to have increased the level of real GDP by around ¾ per cent in 2019-20 and around 4¼ per cent in 2020-21.
"The fiscal measures are also estimated to have lowered the peak of the unemployment rate by around 5 percentage points."
The Treasurer revealed that one of the key assumptions in the treasury's modelling is that Australia will reopen its international borders with a 14-day quarantine from 1 January. It's economic outlook is also based on the assumption that Victoria will not be forced to extend its current stage three measures beyond the initial 6 weeks.