The financial pain wrought by the coronavirus pandemic will be felt for years to come in the federal budget, which was $85.8 billion in deficit in the 2019-20 financial year, and will grow to a $184.5 billion deficit in the 2020-21 financial year.
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The figures represent a $90.8 billion deterioration in the budget position since the government presented a balanced budget in December, before Australia was hit by the bushfire crisis and the pandemic.
Treasurer Josh Frydenberg and Finance Minister Mathias Cormann are handing down the economic statement in Canberra on Thursday, and while admitting the deficit is "eye-watering", Mr Frydenberg has also pointed to billions in financial support for the economy, worth 14.6 per cent of GDP.
Australia's debt levels have also grown. Net debt is expected to be $488.6 billion on June 30 this year and grow to $677.1 billion next financial year. While Mr Frydenberg has said it will take "a number of years" to pay back the debt, which in 2020-21 will be 35.7 per cent of GDP.
The government expects real gross domestic product to be slashed by 7 per cent in the June quarter.
Tax receipts are forecast to be down by $95.6 billion, with all tax receipts, including income tax, business tax and GST, to be down. Despite this, the government expects household consumption to lead the economic recovery. Forecasts have been made assuming the Victorian lockdown will last only six weeks, and the rest of the Australian economy will continue to open up as planned.
Within the bleak global picture, both in a health and economic sense, Mr Frydenberg sought to explain the context in which Australia's own dire projections were made.
"What is primarily a health crisis has devastated economies worldwide," he said.
"In the last 40 years, the global economy has contracted only once. That was when it contracted by just 0.1 per cent in 2009 during the GFC. The OECD is now expecting that the global economy will contract by 6 per cent this year."
Mr Frydenberg said Australia had performed better than almost any country in the world.
The figures in the economic statement point to higher levels of unemployment persisting for more than a year, and negative GDP growth to continue.
"We can see the mountain ahead and Australian begins the climb," Mr Frydenberg said.
"We must remain strong, we must draw strength from our resilience as a nation and a people. We will get through this, and we will get through this together."
Mr Frydenberg and Senator Cormann said Australia was in a better position as a result of the government's economic policies before the pandemic hit, and due to the swift response to combat the virus itself.
Prime Minister Scott Morrison warned earlier this week the economic update shouldn't be labelled a "mini-budget" and there were little new announcements.
As well as extensions to the JobKeeper and JobSeeker schemes announced on Tuesday, the government is also extending other coronavirus support measures.
Australians will now have until the end of the year to apply for early release of up to $10,000 of their superannuation, an extension from September.
Loan guarantees for small businesses will also be extended until the end the 2020-21 financial year, with some amendments.
The combined effect of decisions taken for the bushfire recovery, the health response to the pandemic and the economic measures have cost $58 billion in 2019-20 and this financial year will cost the budget $118 billion.
More to come.
Sally Whyte
I report on a range of issues in federal politics and the public service, with a real passion for how decisions made in Canberra affect the lives of Australians.
I report on a range of issues in federal politics and the public service, with a real passion for how decisions made in Canberra affect the lives of Australians.
