The Queen Victoria Building on a near-empty street during a partial lockdown in Sydney.
Australia’s budget deficit will blow out to 7.2% of gross domestic product this fiscal year and in the 12 months through June 2021 as revenue collapses and spending soars in response to a virus-induced economic shutdown, Deloitte Access Economics said.
“The budget is taking a series of staggering blows,” Chris Richardson, a Deloitte partner, said in a report released Monday. “Fewer workers and lower incomes mean personal taxes take the biggest hit compared with official forecasts.”
Relative to the Mid-Year Economic and Fiscal Outlook released in December, revenues are set to fall short by 6% in 2019-20, and then 16% in 2020-21, it said. Profits will “take a pounding as well,” meaning corporate taxes look set to fall well shy of official forecasts.
The government and central bank put together a fiscal-monetary package worth 16.4% of GDP to help nurse households and firms through the crisis. Authorities plans to reopen the crippled economy by July and aim to get 850,000 people back in jobs, as their success in flattening the curve of new coronavirus infections allows a relaxation of lockdown restrictions.
“Even with the amazing success Australia is achieving in the fight against the virus, the oldest problem in economics is that unemployment goes down much slower than it goes up,” Richardson said.
“So our nation will begin its recovery with unemployment high, the private sector scared, the Reserve Bank tapped out, and prices for our key exports weak,” he warned. “That says Australia’s recovery will be strikingly dependent on the extent to which our governments — federal and state — switch their policies away from the virus sprint and towards the recovery marathon.”