During his ministerial address at the Parliament House in Canberra on 12 May, Treasurer Josh Frydenberg said it is projected that Australia’s GDP will fall by over 10 per cent in the June quarter. This would represent the nation’s 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,” he said.
The Treasury is also forecasting the unemployment rate to reach around 10 per cent, or 1.4 million unemployed, in the June quarter.
“This 5 percentage point increase in the unemployment rate is expected to occur over three months compared to the three years it took the unemployment rate to rise by the same amount in that devastating period of the early 1990s.”
It is also expected that business investment will fall sharply in the June quarter, falling by around 18 per cent, concentrated in the non‑mining sector.
Overall, Mr Frydenberg noted, the economic data has been sobering.
“In March, business and consumer confidence saw the largest declines on record. The ASX200 lost more than a third of its value in just over four weeks. In April, surveys showed that job ads halved and activity in the construction, manufacturing and the services sector had their largest ever monthly falls.”
Mr Frydenberg said the scale of the economic shock is hitting the budget bottom line and the monthly financial statements for March provide the most recent report on the Budget position.
To the end of March, the underlying cash deficit was $22.4 billion, $9.9 billion higher than forecast in the mid-year economic and fiscal outlook (MYEFO), while tax receipts were $11.3 billion lower than forecast.
“While payments to the end of March were still $1.4 billion lower than in the MYEFO profile, this will change from the next statement onwards as the measures we have implemented continue to ramp up.”
Since MYEFO, the total face value of Australian Government Securities on issue has increased by more than $50 billion from $560 billion to $618 billion as of 8 May 2020.
An updated economic and fiscal outlook will be provided in June, following the release of the March quarter National Accounts with the Budget to be delivered in October.
“While there will be a significant increase in Government debt which will take many years to repay, our measures have been designed in a way that protect the structural integrity of the budget,” said Mr Frydenberg.
However, he said that as Standard & Poor’s stated less than four weeks ago, while the Government’s fiscal measures will “weigh heavily on public finances in the immediate future, they won’t structurally weaken Australia’s fiscal position.”
“With $320 billion, or 16.4 per cent of GDP in financial support, our focus is getting the country through the crisis and positioning the economy to recover on the other side.”
“This has only been possible because of the position of strength from which we entered the crisis.”
