Australia Records its Biggest Deficit Since World War II
Economic News: On Thursday, Australia announced that it expected its budget deficit to deepen significantly as it battles the coronavirus pandemic. The pandemic ended its economy’s three-decade streak – the longest seen in any country worldwide.
Australia expects its budget deficit to deepen significantly to $61.27 billion in the financial year ending on June 30. This is in comparison to a balanced fiscal position the previous year.
The country has stated this through a joint statement with the Australian treasurer and finance minister.
Australia has projected the shortfall to widen even more to $131.78 billion in the new fiscal year. According to Reuters, Australia’s deficit is the biggest since World War II.
Mathias Cornmann, Australia’s finance minister, described the deficit as “challenging”. In his statement, he also included government projections for growth, debt levels, and employment.
He clarified that the overwhelming numbers about the economy resulted from the coronavirus pandemic and its effects.
The Australian government announced its fiscal stimulus worth $206.54 billion is to support workers, households, and businesses managing the pandemic’s economic effects.
That’s equivalent to 14.6% of the country’s GDP.
Australia expects additional spending to increase its debt levels significantly. Cormann said the country’s current financial position was still better and stronger than most countries. It still had the fiscal capacity to continue responding to the pandemic.
However, even with the government’s support, Australia forecasts its economy to shrink by 3.75% this year. It could then grow by around 2.5% next year.
Infections continue
Nicki Hutley said the trajectory of the Australian economy depended on how the domestic coronavirus outbreak turns out. Hutley is a partner at Deloitte Access Economics.
The country is experiencing a surge in new infections in the last few weeks – many concentrated in the Victoria state. Victoria state is the second-largest populous city in Melbourne. The resurgence led the government to reinstate a partial lockdown on Melbourne.
Nicki said the number of COVID-19 cases is the biggest predictor of Australia’s economic outlook and what that means for lockdown.
She also explained that the state of Victoria and its neighbor New South Wales account for more than half of Australia’s GDP. Therefore, further lockdowns would have a major impact on the overall economy.
