COVID-19 transformed federal budget policy miraculously. Canberra had been rigorously on-course to satisfy the long-standing bipartisan objective of budget surplus. However, as soon as the enormity of the virus was apparent, a deficit of nearly 10 per cent of GDP – one of the highest in the world – was implemented, with universal approval.
Miraculous though this is, the next stage requires even greater policy dexterity: getting the budget back to normal. But the COVID-19 experience has upended what normality might be.
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Stephen Grenville is a former deputy governor of the Reserve Bank of Australia and a non-resident fellow of the Lowy Institute.
