In December last year, the Finance Minister Mathias Cormann and I stood together and delivered the Mid-Year Economic and Fiscal Outlook.
It followed the first balanced Budget in 11 years, the largest legislated tax cuts in more than 20 years and welfare dependency at its lowest level in 30 years.
Australia’s economy was growing and jobs growth was strong.
Today we stand in a very different world.
Australia and the world are now experiencing the most severe economic crisis since the Great Depression.
What is primarily a health crisis has devastated economies worldwide.
In the last 40 years, the global economy has contracted only once. Falling by just 0.1 per cent in 2009 during the global financial crisis.
This calendar year, the OECD is forecasting the global economy to contract by 4¾ per cent.
The IMF is expecting 157 economies to contract this year with unprecedented falls in many.
The United States is forecast to contract by 8 per cent this year and the euro area by 8¾ per cent.
The coronavirus pandemic has led to unprecedented economic support, more than $US11 trillion globally.
Here in Australia, the Morrison Government has deployed $289 billion in fiscal and balance sheet support, the equivalent to 14.6 per cent of GDP.
Our economic strength going into this crisis has given us the financial firepower to respond during this crisis.
The actions we have taken have saved lives and livelihoods.
Australia has performed better on the health and economic fronts than nearly any other country in the world.
However, the impact of the coronavirus has led to a significant decline in tax receipts and a large increase in Government payments, driving a dramatic change in the Budget position.
These numbers reflect the harsh reality we face.
The economic outlook remains uncertain.
Recent events in Victoria are testament to this, a painful reminder how a setback in combating the virus can impact the speed and trajectory of our national economic recovery.
In the economic numbers released today, Treasury are forecasting real GDP to have fallen by 7 per cent in the June quarter, with household consumption, dwelling investment, business investment and exports all expected to fall as a result of the COVID crisis.
Real GDP is expected to fall 3 ¾ per cent in calendar year 2020, but grow 2 ½ per cent in calendar year 2021.
Treasury has based their assumptions on Victoria being in lockdown for six weeks from 9 July, after which restrictions are progressively eased. Other States are assumed to be opening up, in accordance with the plan agreed by National Cabinet on May 8.
One of the largest impacts of this crisis is its effect on the labour market. Between March and May 870,000 jobs were lost and more than one million Australians saw their working hours reduced, in many cases to zero.
These are mums and dads, sons and daughters, friends and colleagues.
At 7.4 per cent in June the official unemployment rate is expected to peak at around 9¼ per cent in the December quarter 2020.
Without the Government’s fiscal measures, the unemployment rate would have peaked 5 percentage points higher. The Government’s economic support has saved 700,000 jobs.
As we move to the next phase of this crisis, our JobMaker plan will get more Australians back into jobs.
As part of our JobMaker plan we have already announced a $2 billion JobTrainer skills package, an extension of our 50 per cent wage subsidy for apprentices and trainees and the creation of a national fund for job seekers to reskill and upskill, a Higher Education relief package that will subsidise short courses in critical areas like nursing, teaching and science to help Australians get back into work as quickly as possible.
We have also announced $2 billion for priority infrastructure shovel-ready projects to support local jobs and a HomeBuilder package that will support an additional $1.6 billion in dwelling investment in 2020-21.
Deregulation and a more flexible industrial relations system, including the continuation of the temporary changes we have made in response to the crisis will be central to our plan for jobs.
The impact of the coronavirus has resulted in a major hit to the Budget bottom line.
Our fiscal measures have been worth $164 billion, equivalent to around 8.3 per cent of GDP.
Of this spending 99 per cent is over the two financial years 2019/20 and 2020/21. Our measures have been temporary and targeted and maintained the structural integrity of the Budget.
This includes the $86 billion JobKeeper program which is today supporting 3.5 million workers, or 30 per cent of the pre-COVID private sector workforce.
The $16.8 billion coronavirus supplement has also been important to cushion the blow for more than two million Australians on income support.
The Morrison Government has also delivered two cash payments of $750 for more than 3 million pensioners, a $31.9 billion cashflow boost for 760,000 small and medium-sized businesses and $9.4 billion for additional health measures for personal protective equipment, expanded telehealth services and boosting Australia’s hospital and pathology capacity.
Every resource at the Government’s disposal is being marshalled to defend the nation from this virus.
As a result of the coronavirus tax receipts have been revised down by $95.6 billion.
Personal income tax, company tax and GST receipts are all down.
As a consequence of lower receipts and higher payments the deficit is estimated to be $85.8 billion in 2019/20 and $184.5 billion in 2020/21.
These deficits reveal the cost to the Budget of protecting lives and livelihoods during COVID-19.
The pandemic has also led to a sharp increase in Australia’s Government debt.
Net debt is expected $677.1 billion or 35.7 per cent of GDP at 30 June 2021.
However, with a debt servicing cost of 0.8 per cent of GDP in 2019/20 owing to historically low interest rates, our debt burden remains manageable.
Despite our increased debt levels, they remain lower than what many comparable nations went into this crisis with.
The average debt to GDP ratio for major advanced economies is now expected to exceed 100 per cent in 2020.
Australia’s strong fiscal position has seen our AAA credit rating reaffirmed by all three major credit rating agencies during this pandemic and we have been singled out by the IMF to be the only developed economy to have its economic outlook upgraded this calendar year.
Australia is experiencing a health and economic shock like no other in the last 100 years.
Tragically 128 Australians have lost their lives and as we stand here today more than five million of my fellow Victorians are in lockdown.
Our economy has taken a big hit and there are major challenges we confront.
We can see the mountain ahead and now Australia begins the climb.
But we must remain strong and we must draw strength from our resilience as a nation and a people. We will get through this and we will get through this together.
Josh Frydenberg is the Federal Treasurer.