Australia’s bottom line is expected to be nearly $200 billion in the red next year with no budget surpluses in sight thanks to the coronavirus hit on the economy.
The Parliamentary Budget Office has crunched the numbers on the medium-term impact of the pandemic based on the Reserve Bank of Australia’s latest forecasts.
Its analysis, released on Friday, showed the blowout in next year’s budget – mainly due to spending to support people through the economic crisis – would be between $172 billion and $214 billion.
The government had expected to deliver a modest surplus.
The PBO says the underlying cash balance, or deficit, would still be between $16 billion and $30 billion worse off by 2029/30.
Its ranges are based on the Reserve Bank’s anticipated baseline, best and worst case scenarios for the spread of the virus and need for lockdowns, and don’t take into account the impact of summer’s bushfires.
Government debt in 2029/30 could be between 11 and 18 per cent of GDP ($500 billion to $620 billion) higher.
Prime Minister Scott Morrison said the PBO analysis highlighted that the heavy spending on support measures like the JobKeeper wage subsidies weren’t the only hit to the budget.
“The coronavirus has hit not just the expenditure side of the budget, but it’s got a massive hit on the revenue side, and that is very, very significant,” he told reporters in Canberra.
“That is why, more than ever, we have to be careful about the expenditure we are engaged in.
“It can’t provide long-lasting heavy burdens on the fiscal side down the track, baked-in expenditure.”
He emphasised the JobKeeper program had been legislated for six months and people could count on it until the end of September.
What happens beyond then is being considered as part of a review now under way.
The government will respond with any changes when Treasurer Josh Frydenberg updates its budget position on July 23.