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‘Eye-watering numbers’: Cost of Covid-19 revealed

Lucy Dean
·2-min read
CANBERRA, AUSTRALIA - JUNE 18: Treasurer Josh Frydenberg during a press conference at Parliament House on June 18, 2020 in Canberra, Australia. The Australian Bureau of Statistics has released the Labour force figures in Australia for May 2020. Australia's unemployment rate jumped to 7.1 percent in May from 6.4 percent in April, with the Bureau of Statistics estimating a further 227,700 jobs were lost last month. (Photo by Sam Mooy/Getty Images)
Josh Frydenberg will deliver a major economic update today. (Photo by Sam Mooy/Getty Images)

Australian Federal Treasurer Josh Frydenberg was due to deliver a long-awaited surplus this year, but will today instead unveil an “eye-watering” deficit.

Forecasts for the deficit see it range up to $220 billion, the biggest shock in a century. It comes after the Department of Finance confirmed the deficit had hit $40 billion in April, and as the Victorian lockdown adds another $3.3 billion to the tab.

“You will see eye watering numbers around debt and deficit,” Frydenberg said on Today.

“Numbers that Australians have never, ever seen before.

“That’s the harsh reality of this pandemic. The coronavirus has required the government to spend unprecedented amounts of money to support people in need.”

Frydenberg will today announce the government’s mid-year financial update, a day after the country recorded its worst day of coronavirus cases, with 484 new cases recorded in Victoria.

It also follows Tuesday’s confirmation that JobKeeper and JobSeeker would be extended at a cost of $16 billion.

However, Frydenberg has also said Australia’s levels of debt as a share of Gross Domestic Product is still strong compared to many other countries.

“The government is providing timely economic support with significant fiscal and balance sheet measures that are temporary and targeted helping those who need it most, and we carefully designed our economic support measures to ensure we maintained the structural integrity of the budget.”

AMP Capital chief economist Shane Oliver said Thursday’s economic update may see income tax cuts brought forward, along with additional investment incentives.

“As a result of the government’s fiscal response and the hit to public revenue from the economic downturn, the budget deficit is expected to blow out from around $95 billion for the past financial year to around $223 billion this financial year before improving from 2021-22, as support programs phase down and the economy recovers,” Oliver said.

“This would see the budget deficit as a share of GDP peak at around 11 per cent of GDP in 2020-21, which would be its highest since World War 2. Spread over several years, this will add nearly 20 per cent of GDP to Australia’s public debt.”

While stunning, Oliver said this deficit is still affordable.

“The best approach to getting debt back down is to grow the economy aided by a reinvigorated economic reform agenda, but for a while government fiscal support will continue to be needed.”

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