Coronavirus Australia: Parliamentary Budget Office releases update

Welfare costs surge by $6.5bn as total government expenses jump $8.7bn, says the Parliamentary Budget Office.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison.

Welfare and social security costs in March surged by $6.5 billion compared to a year earlier, as total government expenses jumped $8.7bn, according to the Parliamentary Budget Office.

“This partly reflected the government’s initial economic response to the COVID-19 pandemic, which included expenses for eligible individuals recognised on March 31 even if the cash payments were made later,” the PBO report said.

The federal budget’s underlying cash balance over the financial year to March was -$22bn, compared to an expected -$12.5bn.

Commonwealth’s net debt at the end of March stood around $430bn, already around $37bn higher than the most recent forecast for June 30.

The PBO analysis was based on figures released by the Department of Finance on April 24, and is the first of a new monthly series designed to track the impact of the pandemic on the Commonwealth’s fiscal position.

The March figures showed government revenue in March 2020 was similar to March 2019, suggesting the hit to government coffers from a collapse in economic activity will only show in the April figures.

“Other effects of the COVID-19 pandemic and the associated policy measures will feed through to the financial statements in the coming months,” the PBO said.

“Some of the effects will take time to flow through, so it could take an extended period to understand the full fiscal impact.”

Economists expect the budget deficit to climb above $100bn in this financial year, and even higher again in the next.

Josh Frydenberg will provide an economic update when parliament sits on Tuesday — the day the budget was due to be delivered before the pandemic forced a delay to early October. The government will issue a more fulsome update following the release of the March national accounts figures on June 3.