Tim Pallas flags $7.5b budget deficit due to coronavirus
Victoria’s economy will be limited by coronavirus until Christmas as revised figures reveal the multi-billion dollar cost of the pandemic. But there is a glimmer of hope.
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The Victorian economy is expected to be limited by coronavirus restrictions until Christmas, according to the federal government’s grim budget update.
The Treasury forecast, unveiled by Josh Frydenberg this morning, assumes that Melbourne’s current lockdown will not be extended and will last for six weeks.
From mid-September, the federal government expects Daniel Andrews will shift to step one of the national cabinet’s three-step plan to reopen the economy.
That would include a 10-person limit on indoor activities.
By mid-December, the forecast assumes Victoria will reach step three of the plan - where all other states are now at - with a 100-person limit for indoor activities and density rules applying to venues such as cafes, pubs and gyms.
It comes as Treasurer Tim Palla revealed the coronavirus pandemic has blown a multi-billion hole in the Victorian economy with a $7.5 billion deficit.
Mr Pallas described the economic hit as “devastating.”
However, he remained confident that the Victorian economy “will make it through to the other side of this pandemic”.
“This is grim,” he said. “It’s one of the biggest economic challenges, the state, Australia and the world economy has faced in history.
“This will be a very traumatic and dramatic economic event.
“The economic devastation caused by coronavirus is simply eye watering.”
The revised modelling forecast Gross State Product to fall by 5.25 per cent this calendar year.
Taxation revenue will drop by $8.5bn across 2019/20 and 2020/21.
In a glimmer of hope, the unemployment rate was expected to peak at 9 per cent in the September quarter — lower than previously predicted.
Mr Pallas flagged there was no intention to find savings in the near future, saying “the No.1 priority going forward will be jobs”.
Of particular focus would be young and vulnerable workers.
Defending the recent pay rise awarded to the state’s public sector, Mr Pallas maintained it was fair and in line with activity in other states.
Earlier in the year the state government announced they could access $24 billion in emergency funds to respond to the virus.
However, only $3 billion was drawn down from the facility in 2019/20 to help fund the health system.
Mr Pallas said economic repair would come only when we had got on top of the virus.
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Originally published as Tim Pallas flags $7.5b budget deficit due to coronavirus