Australia faces “sobering” future economy due to coronavirus

CANBERRA, Australia >> Australia’s treasurer said today the country faces a “sobering” economic outlook due to the effects of the coronavirus and will have its largest-ever deficit when a revised budget is released in October.

The 2020-21 federal budget was due to be released today. But the government was forced to delay it until it assesses the full economic cost of the coronavirus.

“Overall, the economic data has been sobering,” Treasurer Josh Frydenberg told Parliament on the first day of a scheduled three-day sitting this week. He said he expects gross domestic product (GDP) will fall more than 10% in the June quarter, representing the biggest fall on record.

Frydenberg did not say what the government’s deficit will be. The financial year in Australia ends on June 30.

The federal government allocated more than 230 billion Australian dollars ($148 billion) in stimulus measures, more than half of that aimed at helping eligible employers keep their businesses afloat.

“Given the level of uncertainty, our economic measures provide more than financial relief,” Fydenberg said. “They provide a psychological boost as well.”

Frydenberg said opposition demands for more support for employers and employees during the pandemic was not likely to happen.

“Australians know there is no money tree,” 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.”

Frydenberg said the underlying cash deficit at the end of March was A$22.4 billion ($14.4 billion), almost A$10 billion ($6.5. billion) higher than the government forecast in December’s midyear budget update.

When Frydenberg released the 2019-20 budget in April 2019, he said Australia was “back in the black,” with a A$7.1 billion ($4.6 billion) surplus forecast this financial year. But the government revised its surplus forecast to A$5 billion ($3.2 billion) in December — before devastating wildfires and the coronavirus hit the Australian economy.