A chart is shown showing the areas of Melbourne that will need to be closed as Victorian Prime Minister Daniel Andrews speaks to the media on July 7, 2020 in Melbourne, Australia.
Darrian Traynor | fake pictures
Australia will reveal its first economic and fiscal update since the coronavirus outbreak on Thursday, as the nation navigates its biggest economic recession in nearly three decades.
“The coronavirus crisis has seriously affected our economy and has seriously affected our budget,” Australian Finance Minister Mathias Cormann told CNBC just hours after establishing contacts with his political colleagues at the meeting of finance ministers and G20 central bank governors.
“We have had to make political decisions with a fiscal impact of $ 56 billion (AUD) ($ 39 billion), and in addition to that, there will be an impact of the economic impact on income and expenses in all areas, “he added.
The July Economic Declaration is ahead of the official government budget in October. Analysts say it will show the government’s economic forecast for the next two fiscal years, while describing the next stage of the policy response and the possible record budget deficits to follow as a result.
“We estimate deficits of $ 95 billion, 4.8% of GDP, for 2019-20,” wrote Westpac chief economist Bill Evans in a research note this weekend. The company forecasts a budget deficit in 2020-2021 of $ 240 billion and expects a large additional deficit of the order of $ 150 billion in 2021-2022.
“Falling confidence amid concerns about the ‘second waves’ will surely lead the government to confirm a set of policy initiatives that will extend its stimulating stance, although there will be a significant decrease in that stimulus,” Evans added.
Government to Take Adequate Job Support Measures Despite Increased Virus Count
Among the announcements expected Thursday will be a review of the government’s “JobKeeper” wage subsidy scheme, which allows eligible employers to receive $ 1,500 ($ 1,050 USD) per employee per fortnight. The move was well received by national companies and covered jobs, but will likely cost the federal government $ 70 billion before it expires in September.
“The forecast at the moment is better than we feared earlier this year, and some of the costs we made for some programs like JobKeeper initially turned out to be less expensive than initially expected,” Cormann said.
“There will be a new period of support for those companies that really need it,” he added, saying that the support will be “more specific” to ensure that the government-provided tax boost goes to those companies that need it most.
The focus on the jobs comes as Australia struggles to cope with a surge in COVID-19 cases in its two most populous cities, Sydney and Melbourne. In Melbourne, Victoria state, 363 new coronavirus cases were recorded on Sunday after 217 cases the day before.
“That is unknown for next quarter,” Cormann said, warning that increasing cases and prolonged blockades could threaten to prolong economic unrest. Australia’s unemployment rate reached 7.4% in June, the highest level in 22 years.
“The June quarter was always going to be the worst quarter,” Cormann said. “Seven point four percent is high for us, but it’s not as high as we feared it would be. In March, when we were looking into the future, our expectation was an unemployment rate of about ten percent. Slightly below. of that “.
“I think the Australian economy needs more support in the next six to twelve months,” Diana Mousina of AMP Capital told CNBC. “We believe that the unemployment rate is likely to remain between 7 and 8 percent over the next year, which is very high.”
“Before the coronavirus, we were talking about an unemployment rate of five percent,” he added.
G20 aware of “tantrum” stimulus as economies recover
Cormann said governments must work together to avoid disruption as crisis-era fiscal stimulus begins to shrink worldwide. “It is certainly true that there is a risk here,” he said.
“It is Australia’s position within the G20 that there has to be a globally coordinated approach to getting this transitional fiscal support out of all of our economies,” he added. “It will not be fiscally sustainable to provide fiscal support at the same level that governments around the world are currently providing on a continuous basis. There will have to be a transition to the new normal.”
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