Coronavirus: Victoria could worsen already painful numbers

Treasurer Josh Frydenberg with Senator Mathias Cormann. Picture: Gary Ramage

Josh Frydenberg has unveiled the biggest budget deficit since World War II – $85 billion this year and $184bn in 2020-21 – and a record national debt requiring a new ceiling edging towards a trillion dollars.

Only six months ago a budget surplus – the first in a decade – was the be all and end all of the Morrison government’s economic and political strategies.

The national debate was continuing as it had for the last three decades built on the reform and recession of the Hawke-Keating years, the recovery, restoration of budget surpluses and elimination of national debt of the Howard-Costello years and the attempts to get

debt and deficit back under control of the Rudd, Gillard, Abbott and Turnbull years.

Scott Morrison had declared the budget was “back in the black” and the Treasurer said the budget was “in balance” and forecast a surplus of $5 billion this year.

Yet Frydenberg has now declared the worst budget figures for 100 years and forecast a peak of unemployment of 9.25 per cent – double what it was last year – in the December quarter as business crashes cutting jobs, income and investment.

These are extremely “painful numbers”, as Frydenberg said, and any hope of containing the pain and reviving the economy, business and jobs relies heavily on the easing of health restrictions, including after just six weeks in Victoria.

The economic situation is dire already but under greater threat from any worsening in the health crisis with Treasury’s estimate that the pandemic spike in Victoria is costing the national economy more than $3 billion in this quarter.

Yet, politically it’s as if it doesn’t matter: the debt and deficit debate is dead, economic management rules have changed and the public has different priorities.

The number one concern of Australians is now whether they will be infected by coronavirus not the size of the deficit or the national debt or even if they will lose their job.

The Prime Minister is addressing that priority by making medical advice sacrosanct and beyond political decisions, he’s dumped conservative ideology on spending and welfare support and built political capital by being apolitical.

So far, even with these terrible numbers and dreadful outlook the Morrison government is getting overwhelming public support in relation to both health and economic management.

There is a recognition of the global scope of the crisis and Australia’s relatively good performance and there is approval for the $289 billion in support.

The hard bit for the Coalition is going to be whether the optimistic forecasts are fulfilled, the delivery of the support schemes are not wasteful and the economy does revive.

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WHAT YOU NEED TO KNOW FROM JOSH FRYDENBERG’S ECONOMIC STATEMENT:

Unemployment
• The jobless rate will peak at 9.25 per cent in December
Debt
• Net debt will hit $677.1bn in 2020/21

Budget forecast
• Budget deficit to grow to $184.5bn in 2020/21
GDP
• Real GDP is expected to fall 3.75 per cent in the 2020 calendar year

JobKeeper program
• The wage subsidy will cost the budget $85.7bn over the next four years
Welfare
• Government payments will cost the budget $16.72bn over the next four years