The Australian Government yesterday released the widely anticipated Economic and Fiscal Update, which showed the impact of the COVID-19 pandemic on the nation’s finances as well as the scale of the government’s response in providing support to the health system and cushioning the blows for households and businesses.

Key points include:

  • The underlying cash balance is forecast to decrease from balance in 2018-19 to a $85.8 billion deficit (4.3 per cent of GDP) in 2019-20 and a $184.5 billion deficit (9.7 per cent of GDP) in 2020-21. In December, the Government was forecasting a $5 billion surplus (0.3 per cent of GDP) in 2019-20.
  • Taxation receipts decreased by $31.7 billion in 2019-20 and are expected to suffer another $63.9 billion decline in 2020-21.
  • Payments variations, including in demand driven programs, increased by $15.7 billion in 2019-20, predominantly as a result of the impact of the COVID-19 pandemic on the economy.
  • The economic support of around $289 billion (14.6 per cent of GDP) is estimated to have increased the level of real GDP by around 0.75 per cent in 2019-20 and around 4.25 per cent in 2020-21. The fiscal measures are also estimated to have lowered the peak of the unemployment rate by around 5 percentage points.
  • The unemployment rate is forecast to peak at around 9.25 per cent in the December quarter although labour market conditions are expected to strengthen beyond 2020.
  • On a calendar-year basis, real GDP is predicted to grow by 2.5 per cent in 2021, after a fall of 3.75 per cent in 2020.
  • Net debt is expected to be $488.2 billion (24.6 per cent of GDP) at 30 June 2020 and increase to $677.1 billion (35.7 per cent of GDP) at 30 June 2021.

The Economic and Fiscal Update is available on the Budget website.

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