SYDNEY– Australia will record its biggest budget deficit since World War Two, Treasurer Josh Frydenberg will say on Thursday, as the spread of COVID-19 saw the government roll out billions in stimulus to support a shuttered economy.
Detailing for the first time the full extent of the economic impact of COVID-19, Frydenberg will say government revenues have plummeted at the same time Australia channels about A$290 billion in fiscal support, extracts of the announcement seen by Reuters show.
“Our announced measures, together with large declines in taxation receipts, has seen a hit to the bottom line,” Frydenberg will tell Australian lawmakers in Canberra.
“But this has been necessary in order to cushion the blow for millions of Australians, and to keep businesses in business and keep Australians in jobs.”
The exact size of the deficits for the financial years 2019/2020 and 2020/21 will be published later on Thursday.
Economists expect that for the year that ended on June 30, the budget deficit will top A$75 billion, or about 4% of Australia’s gross domestic product.
Next year, the deficit is tipped to be in excess of A$200 billion or about 10% of GDP.
The figures could also deteriorate as Australia struggles to contain a fresh outbreak of COVID-19.
Australia on Wednesday posted its biggest one-day jump in new infections amid a surge in cases in the country’s second most populous state, which ordered nearly 5 million people to stay home unless for essential reason two weeks earlier.
The figures are far cry from estimates made as recently as December, 2019.
Back then, Australia was expecting to post its first budget surplus in more than a decade.
In March, however, Australia shut its international borders and shut large swathes of its economy.
It did slow the spread of the coronavirus, but it was a hammer blow to Australia’s economy, which is heading into its first recession in three decades as the unemployment rate hits a 19-year high of 7.1%.
Frydenberg will say that as a result, company tax receipts are expected to fall by more than A$25 billion between July 1, 2019 and June 30, 2021.