Pandemic policies have whacked the budget and there’s much more pain to come.
Yet, while Australia plunges into recession and towards a forecast deficit larger than anything we’ve seen since World War II, few doubt the coronavirus spend has been necessary.
In his economic update, Treasurer Josh Frydenberg announced a forecast deficit of $85.8b in 2019-20 and a $184.5b deficit in 2020-21.
Australia’s gross debt is forecast to hit $851.9 billion. That’s a massive debt. It will take many years to pay off.
But it has been necessary. The debt is largely a result of the response measures to COVID-19.
These have been good policies – policies that have seen Australia ride the pandemic storm better than many other nations around the world.
The government has delivered $164 billion in direct financial support to help the nation through what is being described as Australia’s darkest economic time in generations.
“Our announced measures, together with large declines in taxation receipts, has seen a hit to the bottom line, but this has been necessary in order to cushion the blow for millions of Australians, and to keep businesses in business and keep Australians in jobs,” Frydenberg said.
By Christmas, there is likely to be another 240,000 Australians out of work.
The JobKeeper wage subsidy and the coronavirus supplement to JobSeeker have cost the bottom line dearly, but these initiatives have been vital.
The adjustments to those payments, announced this week, are also prudent.
The tweaks will see the government spend on the pandemic fall significantly.
There is no doubt we are facing bleak economic times. The pain will be felt across all sectors of the nation.
But there is also no doubt that the social and economic initiatives put in place to deal with this insidious virus have and continue to be largely well-formulated and carried out.
The federal government is by and large acting assertively and appropriately in responding to COVID-19. By and large, the federal opposition is being supportive.
Desperate times call for decisive measures.
It is worth noting – as many have – that Scott Morrison, having embarked on a tough but wise course – is receiving from the opposition the kind of cooperation that the opposition he belonged to wouldn’t give Kevin Rudd when that prime minister responded similarly to the GFC.