Treasurer concedes coronavirus economic figures ‘sobering’ as Australia faces largest deficit in history

The Federal Treasurer has outlined what he’s dubbed a “sobering” economic outlook on a day when he had long hoped to deliver Australia’s first budget surplus in more than a decade.

The 2020-21 Federal Budget was due to be released today, but the Government was forced to delay until October as it seeks to come to terms with the full economic cost of the coronavirus pandemic.

Instead, Treasurer Josh Frydenberg delivered in the Parliament an economic update, which experts expect will represent the largest budget deficit in Australian history.

Mr Frydenberg said the underlying cash deficit at the end of March was $22.4 billion, almost $10 billion higher than the Government forecast in December’s mid-year budget update.

He said tax receipts were $11.3 billion below December’s expectations.

“Overall, the economic data has been sobering,” Mr Frydenberg said.

But the Treasurer is yet to release what the Government expects the final 2019-20 deficit to be.

The Government has allocated more than $230 billion in stimulus measures, including the $130 billion JobKeeper wage subsidy, in response to the coronavirus.

“Given the level of uncertainty, our economic measures provide more than financial relief,” the Treasurer said.

“They provide a psychological boost as well.”

Mr Frydenberg, when he released the 2019-20 Budget in April last year ahead of the May federal election, declared Australia was “back in the black”, with a $7.1 billion surplus forecast this financial year.

The Government revised its surplus forecast to $5 billion in December, before bushfires and the coronavirus hit the Australian economy.

Economist Chris Richardson, from Deloitte Access Economics, has said the Government was likely to deliver the two biggest deficits in Australian history in its next two budgets.

He expects the Federal Budget will see an underlying cash deficit of $143 billion this financial year, $132 billion next financial year, $52 billion in 2021-22 and $33 billion in 2022-23.

The Treasury expects gross domestic product (GDP) will fall more than 10 per cent in the June quarter, representing the biggest fall on record.

“At $50 billion, this is a loss equivalent to the total combined quarterly production of South Australia, Tasmania, the Northern Territory and the ACT,” Mr Frydenberg said.

The Opposition used the economic update to remind the Government of the back in black campaign ads and coffee mugs it produced after last year’s budget.

Shadow Treasurer Jim Chalmers called on the Government to ease coronavirus restrictions cautiously, amid fears a second wave of COVID-19 could rob state economies of hundreds of millions of dollars a week.

He said it was clear the crisis was having devastating health and economic impacts.

“We need to make sure that as the economy reopens, we do that in a very careful, cautious, considered way that relies heavily on expert advice,” he said.

Labor wants the Government to extend and expand the support on offer through the JobKeeper and JobSeeker programs.

But the Treasurer gave little indication that was likely to happen.

“Australians know there is no money tree,” Mr Frydenberg said.

“What we borrow today, we must repay in the future.

“Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.”

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