The Treasurer last night released the hotly anticipated 2020 federal budget, revealing the extent of COVID-19’s impact – a deterioration from a $85.3 billion deficit last financial year to a forecast deficit of $213.7bn, or 11 per cent of GDP, for 2020-21.
According to Westpac Economics' analysis, the sharp decline from the previously anticipated $6.1bn surplus was due to $159.8bn in new policy while the hit from Australia’s first recession in almost 30 years totalled $59.9bn.
The headline announcements included the bringing forward of personal income tax relief, the extension of the Low and Middle Income Tax Offset, temporary instant asset write-offs for businesses with turnover up to $5bn and a new “JobMaker” hiring credit available to employers who hire those on JobSeeker aged 16-35.
Other key figures were:
The deficit profile is: $112bn for 2021-22; $87.9bn for 2022-23; and then $66.9bn – 3 per cent of GDP – for 2023-24.
Net debt jumps from 19.2 per cent of GDP in 2018-19, to 36.1 per cent of GDP by June before levelling out at around 43.8 per cent of GDP by June 2024.
However, super low interest rates mean debt servicing cost actually inches down to 0.6 per cent of GDP by June 2024.
The economy is forecast to contract -1.5 per cent in the coming year before growing 4.75 per cent in 2021-22.
For more information go to Westpac's federal budget page.