Frydenberg details extent of economic hit from coronavirus
Today was supposed to be the day Josh Frydenberg unveiled the 2020-21 Federal Budget, but instead of ringing in Australia's first surplus in 12 years, the Treasurer delivered a grim summary of Australia’s current economic woes.
According to Mr Frydenberg, the underlying cash deficit had risen to $22.4 billion in March – $9.9 billion higher than the Government had forecasted in its last budget update in December 2019. Tax receipts were also down $11.3 billion.
In the near term, the number of jobless Australians is also expected to swell to 1.4 million, bringing the unemployment rate up from 5.3% to around 10%. The Treasury is also bracing for a 10% drop in GDP in the June quarter.
The path to recovery
While it’s still too early to claim victory against the virus, Australia has seen enormous success in containing its spread. The next major battle will be restoring the economy to its pre-COVID levels.
If the Government moves ahead with its three-stage approach to easing restrictions, the Treasury estimates that around 850,000 jobs will be restored.
A majority of these will come from three particularly hard-hit sectors: accommodation and food services; arts and recreation; and transport, postal and warehousing.
“Treasury estimate that as a result of easing the restrictions in line with stages 1, 2 and 3, GDP will increase by $9.4 billion each month,” Mr Frydenberg said.
“The lifting of restrictions will see Australians move around more freely. Of the $9.4 billion, increasing demand, including in retail, will contribute $2.9 billion.”
A further $2.4 billion will be brought in by reopening cafes, pubs, clubs, entertainment venues, and gyms, while the reopening of schools will contribute nearly $2.2 billion.
Mr Frydenberg also reminded Australians the stimulus packages that the Government has rolled out in recent months have a short legislative life.
“Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase,” Mr Frydenberg said.
“What we borrow today, we must repay in the future.”
Tackling the budget deficit over the coming years will be an uphill battle, but Mr Frydenberg said the Government is committed to shrinking the debt by “growing the economy through productivity enhancing reforms.”
“Reskilling and upskilling the workforce, maintaining our $100 billion, ten-year infrastructure pipeline, cutting red tape to reduce the cost burden on businesses and the economy and tax and industrial relations reform as a means of increasing our competitiveness.”
The 2020-21 Federal Budget will be released in October.