Prime Minister Scott Morrison has confirmed Australia will record its two largest-ever budget deficits in history as a result of the coronavirus pandemic.
A temporary doubling of unemployment benefits and $1,500 a fortnight JobKeeper wage subsidies were unveiled in March as COVID-19 threatened to spark the worst economic downturn since the 1930s Great Depression.
Now the government is planning to spend $72billion fast-tracking transport and resources industry infrastructure programs, on top of three existing stimulus packages worth $154billion.
Mr Morrison, who was treasurer before taking over as PM in August 2018, hinted a shrinking global economy would also play havoc with Australia’s finances as demand diminished for key exports.
Prime Minister Scott Morrison (pictured in Canberra on June 15, 2020) has confirmed Australia will record its two largest-ever budget deficits in history as a result of the coronavirus pandemic
Before the onset of COVID-19, his Coalition government was re-elected promising to return the budget to surplus for the first time since 2007.
‘We are looking at a record deficit this year and next, and not just because of record Covid-19 expenditures,’ Mr Morrison told the National Press Club in Canberra on Monday.
‘Revenues have taken an equally large hit and while lower expenditure measures have been designed to be targeted and time-limited in accordance with the principles we set out, the impact on revenue will be longer lived as the economy makes its way back.
‘This will require us to recalibrate our fiscal strategy.’
The extent of the upcoming budget deficits was confirmed to the Committee for Economic Development of Australia after Mr Morrison announced the government would spend $72billion to fast-track 15 major transport and resources infrastructure projects, in a bid to provide 66,000 jobs.
As a proportion of gross domestic product, the upcoming budget deficits for this financial year, and the following one, would dwarf the size of Labor’s ones during the Global Financial Crisis more than a decade ago.
In the 2009-10 financial year, Kevin Rudd’s first-term Labor government revealed a $54.8billion deficit as it gave out $900 cheques to Australians earning less than $100,000 a year.
A temporary doubling of unemployment benefits and $1,500 a fortnight JobKeeper wage subsidies were legislated in March as COVID-19 threatened to spark the worst economic downturn since the 1930s Great Depression. Pictured is a Centrelink queue in Melbourne
The budget deficit for that financial year comprised 4.2 per cent of GDP.
Deloitte Access Economics is predicting a $143billion deficit for 2019-20, that would comprise 7.3 per cent of GDP.
It forecast a $133billion deficit for 2020-21 which would make up 7.2 per cent of GDP.
The Parliamentary Budget Office is forecasting a $191billion revenue collapse in the 2020-21 financial year, as royalties from mineral exports dried up.
Since the end of April, the Morrison Government has temporarily doubled unemployment benefits, adding a $550 coronavirus supplement to the existing $565.780 JobSeeker payment.
Workers affected by the coronavirus shutdowns are also receiving $1,500 a fortnight in wage subsidies as part of the $70billion JobKeeper program, with the cost last month revised down from the original $130billion figure announced in March. Pictured is the Museum of Contemporary Art cafe at Sydney’s Circular Quay
Until September, jobless Australians are receiving $1,115 a fortnight, as part of a $66billion stimulus program.
Workers affected by the coronavirus shutdowns are also receiving $1,500 a fortnight in wage subsidies as part of the $70billion JobKeeper program, with the cost last month revised down from the original $130billion figure announced in March.
An earlier stimulus program gave $750 payments to 6.5 million Australians, including aged and disability pensioners, the unemployed, parents, students and apprentices, as part of an earlier, broader package worth $17.6billion.
All up, Treasury is already spending $153.6billion on welfare-focused measures.
Treasurer Josh Frydenberg’s budget won’t be delivered until October, with coronavirus delaying the usual May date for spending announcements.