Treasurer Josh Frydenberg last night handed down the belated Federal Budget which is usually done in May, but due to the strange circumstances we all find ourselves in, was handed down in October. That means we are only seven months away from the next version.
In a case of “show me the money” there was certainly a lot of money being dished out last night. In fact, some $98 Billion is the amount being deployed in an attempt to resuscitate an economy that is on its knees. All was not equal as far as who will receive the benefits, and as per normal there are some winners and losers.
In a nutshell the Budget was really about jobs, jobs and more jobs as the focus was on encouraging business to ramp up investment and employ, in particularly the employment young people. The intention is to create an environment for young people to get back to work.
Australia finds itself in the unfamiliar territory of a recession, its first since 1991 and economic performance that has not been this bad since 1959. The Budget revealed an expectation that real GDP is projected to shrink by 1.5% in 2020-21 (by 3.75% in the 2020 calendar year) before an expected rebound in the following years. Unemployment looks like it will peak at 7.25% and it will take at least two years to drop off below 6%.
With the fall in tax revenue and increase in spending, the 2020-21 Budget is projected to be in deficit by $213.7 Billion, with the deficit falling to $66.9 Billion by 2023-24. Net debt will increase to $703 Billion this year and peak at $966 Billion or 44 percent of GDP in 2024. As with most forecasts and modelling there some solid assumptions that have been made such as a Covid-19 Vaccine being available by the end of next year and our economy rebounding with Real GDP forecast to grow 4.75% in 2021-22.
The assumptions being used are certainly already being hotly debated by economists and only time will tell how accurate they were. In fairness, the reality is that no one can accurately predict how the numbers will stack up in the coming months or years, however you need to have a line drawn in the sand to be able to formulate policy decisions.