Treasurer gives gloomy update on economic hit
Frydenberg battles cough to outline blowout in federal borrowing and the biggest fall in GDP in our country’s history
GOVERNMENT borrowing has soared to nearly $620 billion after blowing out by more than $50 billion this year.
And GDP is set to fall by over 10 per cent in the current quarter, our biggest decline on record – equal to stopping all activity in South Australia, Tasmania, the Northern Territory and the ACT.
The “sobering” overview Josh Frydenberg provided to federal parliament yesterday in lieu of the Budget was brought to a halt at one point as he struggled to shake a cough that later led to him being tested for COVID-19.
“If only the Treasurer had coughed up some detail or a plan,” Labor’s Treasury spokesman Jim Chalmers said – before it was known that Mr Frydenberg was to be checked for coronavirus.
The statement to parliament had not provided an estimate for the deficit this financial year, which economists have forecast to reach $143 billion.
Liberal MP Jason Falinski yesterday called for his government to wind down the expensive JobKeeper program once schools resume – much earlier than the current deadline set down for September.
“I think the idea it should go six months just regardless doesn’t make any sense,” Mr Falinski said last night. “You are not keeping your powder dry.
“When schools are back full-time that’s a natural point when we should look at what’s the path out of this.”
Industries still in lockdown should be able to stay on the wage subsidy, Mr Falinski said.
Mr Frydenberg said the path out of the crisis would be guided by the “values and principles” of past Coalition tax and workplace reforms but he did not share more details.
“Encouraging personal responsibility, maximising personal choice, rewarding effort, and risk taking, while ensuring a safety net which is underpinned by a sense of decency and fairness,” he said.
“Unleashing the power of dynamic, innovative and open markets must be central to the recovery with the private sector leading job creation, not government.”
Dr Chalmers said it “was a missed opportunity for the government to bring people into its confidence.”
Later, in question time, Dr Chalmers asked Mr Frydenberg when debt levels would start to fall.
The Treasurer said it was a “very difficult time and a very uncertain economic time”, making forecasting problematic.
The new information Mr Frydenberg did divulge yesterday included that household consumption was expected to be 16 per cent lower in the three months to the end of June when compared to the same time in 2019, due to social distancing, income drops and increased uncertainty.
Business investment was set to be 18 per cent down, with falls concentrated in the nonmining sector.
Dwelling investment would shrink by a similar amount, the Treasurer forecast.
He said that prior to the fiscal impact of COVID-19, the government had been on track to deliver the first surplus in 12 years, “despite the adverse economic impacts from the global trade tensions, fire, floods and drought”.
Mr Frydenberg said Australia’s ability to handle the crisis was a reminder of the “importance of a strong and stable financial position”.
“The proven path for paying back debt is not through higher taxes, which curtails aspiration and investment, but by growing the economy through productivity-enhancing reforms,” he said.
In a positive sign, the ANZRoy Morgan Consumer Confidence rating rose for a sixth straight week after sinking to its lowest level since 1973.
CommSec chief economist Craig James said as restrictions ease and life returned to a sense of normalcy, business conditions would improve.
“But sectors dependent on overseas travel and overseas students will feel the cold winds for much longer,” Mr James said.