Australia’s unemployment rate is predicted to hit 9.25% in the December quarter this year as the shockwaves from the Covid-19 pandemic continue to hit the national economy, Treasurer Josh Frydenberg said in updating the government’s budget figure
In the Economic and Fiscal Update released today, the Treasurer said 700,000 jobs had been saved as a result of government intervention such as the JobKeeper program.
“Without the government’s economic support measures unemployment would’ve peaked at 5 percentage points higher,” he said.
Nonetheless, 709,000 jobs were lost across the country in the June quarter, while another 1 million workers had their hours reduced.
While the nation’s debt bill will hit $851.9 billion in June 2021, Frydenberg said it was “manageable” and lower in terms of debt-to-GDP than many other countries.
“Net debt is expected to be $488.2 billion (24.6% of GDP) at 30 June 2020 and increase to $677.1 billion (35.7% of GDP) at 30 June 2021,” he said.
“Once the economic recovery is established, stronger growth and an improvement in the fiscal position will help to stabilise government debt as a share of the economy.”
The budget is now predicted to post a $85.8 billion deficit in FY2019-20 and a $184.5 billion deficit in FY21.
Adding to the woes is a $95 billion hit to tax receipts over the two years, falling $31.7 billion in FY20 and $63.9 billion in FY21.
GDP is expected to shrink by 0.25% in FY20 – the June quarter fall is 7% – and contract by another 2.5% FY21 before the economy returns to positive growth.
The economic support for workers, households and businesses is put at $289 billion – around 14.6% of GDP – with Frydenberg saying “Our measures have been temporary, they’ve been targeted and they’ve helped maintain the structural integrity of the budget.”
The economic support in response to the pandemic is estimated to have increased the level of real GDP by around 0.75% in FY20 and around 4,25% in FY21.
On a calendar-year basis, real GDP is predicted to grow by 2.5% in 2021, after a fall of 3.75% in 2020.
“There are some positive early signs in the recovery with indicators suggesting that the unwinding of containment measures in the latter part of the June quarter has led to a noticeable recovery in activity and jobs,” Frydenberg said.
“Household consumption is expected to lead the recovery with strong growth in the September quarter, while business and dwelling investment are expected to recover more gradually.”
The Treasurer said more than 960,000 businesses and not-for-profits and more than 3.5 million individuals have been covered by the JobKeeper Payment. As at 16 July, payments totalled over $30 billion, with the program expected to cost $85.7 billion in total.
The Treasurer and Finance Minister Mathias Cormann said the economic and fiscal outlook remains highly uncertain for now as the pandemic continues.
The government will provide forecasts and projections over the forward estimates period and medium term in the 2020-21 Budget, on 6 October, 2020.
The Economic and Fiscal Update is available on the Budget website.