Gross Domestic Product (GDP) fell by around seven per cent in the June quarter with the government expecting gross debt to swell to $851.9 billion by the end of this financial year, with net debt at $677.3 billion.
Updating the government’s budget figures in the Economic and Fiscal Update, released this morning, the treasurer was quick to point out Australia is in a far better position than many other nations.
“Despite increased debt levels they are lower than many comparable nations,” Frydenberg said. “Australia’s strong fiscal position has seen our triple-A credit rating retained. We are the only developed economy to have its economic outlook upgraded this year.”
The treasurer said the coronavirus crisis had led to a drop in tax receipts and a massive increase in spending. The result was a massive change in the budget’s position.
“These harsh numbers reflect the harsh reality we have faced.”
Frydenberg said Australia is experiencing a health and economic crisis like nothing we’ve seen in over 100 years. However, Frydenberg says Australia has come into the crisis with the economy in good shape.
“Going into this crisis has given us the financial firepower to respond during this crisis,” he said. “The actions we have taken have saved lives and livelihoods.”
While 1000s of jobs may have been saved many have been lost with more to come. The treasurer predicts the unemployment rate to continue to climb.
“870 000 jobs were lost. More than one million Australians saw their working hours reduced – some to zero. These are the mums and dads, sons and daughters, our friends and colleagues. Through no fault of their own, as a result of the pandemic around 709,000 jobs were lost across the country in the June quarter.
“The unemployment rate is forecast to peak at around 9¼ per cent in the December quarter although labour market conditions are expected to strengthen beyond 2020.”
Frydenberg says without the government’s support measures, things would have been far worse, with unemployment predicted to be 5 per cent higher than its current rate.
“Our economic measures have saved 100s of 1000s of jobs,” Frydenberg says. “Our skills packages, our extension of the 50 per cent wage subsidy for trainees and the creation of a national fund to upskill and reskill Australians. A higher education package to help Australians get back to work as quickly as possible, our shovel ready jobs and our home renovation packages.”
Frydenberg says all these initiatives have helped lessen the impact of coronavirus on the job market. “Every resource available to the government has been marshalled to defend the nation against the coronavirus crisis.”
Still, there is no denying COVID-19 had a significant impact on the bottom line and will continue to do so for some time to come.
“The economic and fiscal outlook remains highly uncertain,” Frydenberg said.
The deficit is estimated to be 85.8 billion dollars or 4.3 per cent of the GDP and expected to balloon to a $184.5 billion deficit in 2020-21. The government suggests the budget is unlikely to return to surplus for many years.
However, Frydenberg said with debt service historically low, Australia remains in a strong financial position.
“We can see the mountain ahead and Australia begins the climb. We must remain strong, draw strength and resilience as a nation and a people. We will get through this and get through this together.”
The full Economic and Fiscal Update is available on the Budget website.
This post was written by Cec Busby for Kochie’s Business Builders and is republished here with permission.