Gross government debt will blow out to $677.1 billion this financial year.
Treasurer Josh Frydenberg revealed the true cost of the coronavirus pandemic in a special budget update on Thursday.
“These harsh numbers reflect the harsh reality we face,” he told reporters in Canberra.
“We can see the mountain ahead and Australia begins the climb.”
The budget plunged $85.8 billion into deficit in 2019/20, which will more than double this financial year, as the country suffers its biggest hit since the Second World War.
The official unemployment rate is expected to peak at 9.25 per cent in the December quarter, which is lower than initially expected.
Frydenberg said the government had delivered $164 billion in direct financial support to help the country through the economic downturn.
“Our announced measures, together with large declines in taxation receipts, has seen a hit to the bottom line,” he said.
“But this has been necessary in order to cushions the blow for millions of Australians, and to keep businesses in business and keep Australians in jobs.”
Deloitte Access Economics partner Chris Richardson said the massive health crisis was always bound to pound the budget.
But Mr Richardson said the eye-watering debt and deficits had shielded families and businesses from financial ruin.
“There’s a risk today that we talk about how awful it is rather than remembering this is exactly what you want the budget to do in a crisis,” he told ABC radio.
“If you’re going to protect Australians you have to do it through the budget.”
Shadow treasurer Jim Chalmers has long argued the economy was floundering before the coronavirus pandemic struck.
“The government will try and pull a swifty today,” he told reporters at Parliament House.
“They’ll try and pretend all of these hundreds of billions of dollars of debt are purely a consequence of the COVID-19 crisis.”
Thursday’s figures revealed a huge hit to government revenues.
Tax receipts dropped by $31.7 billion in 2019/20 and will decline $63.9 billion this financial year.
Business investment is forecast to fall by six per cent in 2019/20 and 12.5 per cent this financial year.
Mining investment is one of the few bright sparks.
Treasury says the supports put in place have saved 700,000 jobs and lowered the forecast peak unemployment rate by five percentage points.
Since March, there have been record falls in key indicators of business investment, household consumption, the labour market and trade.
The update showed Victoria’s six-week lockdowns will gouge $3.3 billion from gross domestic product growth in the September quarter.
Richardson believes it will take three to four years for the economy to bounce back, but the task will be easier than most people think.
“The rule of thumb is the bigger the downturn, the bigger the bounce back,” he said.
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