There has been a lot of angst about a "fiscal cliff" when legislated support measures during the COVID-19 pandemic, like the JobKeeper wage subsidy and the enhanced JobSeeker dole payment, are due to end in September.
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But AMP Capital chief economist Shane Oliver is confident such worries are overdone and the economy faces something more like a "fiscal slope".
Details of the Morrison government's decisions on these support payments will be announced when Treasurer Josh Frydenberg releases an economic statement on July 23.
"I have made it very clear that there would be a further stage of income support," Prime Minister Scott Morrison said on Friday.
Dr Oliver, encouraged by such comments, believes there will an extension of the JobKeeper program for those who need it and already legislated income tax cuts will be brought forward, as well as other incentives.
He expects this will be funded by the $60 billion underspend in the originally legislated $130 billion JobKeeper scheme.
"The government is also providing further relief on insolvent trading and banks are extending the bank payment holiday for viable customers," Dr Oliver said in a note to clients on Saturday.
"All of which will head off the much-feared crunch point at the end of September when support measures were originally scheduled to end."
Shadow treasurer Jim Chalmers said it would be devastating for businesses and workers if the JobKeeper support was taken away too soon, particularly given the recent virus outbreak in Victoria.
Treasury conducted a review of JobKeeper and JobSeeker, which it handed over to the government at the start of the month.
"If the prime minister has a plan for JobKeeper after September, then let's hear it," Dr Chalmers told reporters in Brisbane on Saturday.
"We have been saying for some time that there's enough uncertainty already. The prime minister shouldn't be adding to that by sitting on this secret report."
Mr Frydenberg's statement is expected to confirm the state of the budget given the billions of dollars in support measures being spent and a steep drop in revenue as the economy entered its first recession in nearly thirty years.
Dr Oliver expects a deficit of $100 billion for the the 2019/20 financial year, growing to around $200 billion in 2020/21. The budget was in balance at the end of 2018/19.
The statement is also expected to provide forecasts for the economic growth outlook and employment.
Australian Associated Press
