Australia faces ‘sobering’ future economy due to coronavirus

Business
Josh Frydenberg

FILE – In this April 2, 2019, file photo, Australian Treasurer Josh Frydenberg addresses the media as he arrives at Parliament House in Canberra, Australia. Treasurer Frydenberg said the country faces a “sobering” economic outlook due to the effects of the coronavirus and said it would have the largest deficit in its history when a revised budget is released in October. (AP Photo/Rod McGuirk, File)

CANBERRA, Australia (AP) — Australia’s treasurer said Tuesday the country faces a “sobering” economic outlook due to the effects of the coronavirus and will have its largest-ever deficit when a revised budget is released in October.

The 2020-21 federal budget was due to be released Tuesday. But the government was forced to delay it until it assesses the full economic cost of the coronavirus.

“Overall, the economic data has been sobering,” Treasurer Josh Frydenberg told Parliament on the first day of a scheduled three-day sitting this week. He said he expects gross domestic product (GDP) will fall more than 10% in the June quarter, representing the biggest fall on record.

Frydenberg did not say what the government’s deficit will be. The financial year in Australia ends on June 30.

Frydenberg had a lengthy coughing spell during his speech to Parliament, forcing him to stop several times to takes sips of water. He later said he was in isolation while he awaits the results of a test for the coronavirus.

“Out of an abundance of caution, it was prudent I be tested for COVID-19,” he said in a statement. “Following the receipt of his advice, I immediately left Parliament House to be tested and will await the result in isolation. I expect the result of my test to be provided tomorrow.”

Other lawmakers present during Frydenberg’s speech appeared to be observing social distancing. The most prominent Australian lawmaker known to have had the virus is Home Affairs Minister Peter Dutton, who has since recovered.

The federal government allocated more than 230 billion Australian dollars ($148 billion) in measures to offset the virus impact, more than half of that aimed at helping eligible employers keep their businesses afloat.

“Given the level of uncertainty, our economic measures provide more than financial relief,” Fydenberg said. “They provide a psychological boost as well.”

Earlier, Frydenberg had forecast unemployment would double to 10%.

Australia, with an economy about the size of Spain’s, is thought to have entered its first recession in three decades this year.

But Frydenberg said the additional support for employers and employees during the pandemic being sought by the opposition was unlikely to happen.

“Australians know there is no money tree,” Frydenberg said. “What we borrow today, we must repay in the future. Temporary and targeted, the new spending measures were not designed to go forever but to build a bridge to the recovery phase.”

Frydenberg said the underlying cash deficit at the end of March was A$22.4 billion ($14.4 billion), almost A$10 billion ($6.5. billion) higher than the government forecast in December’s midyear budget update.

When Frydenberg released the 2019-20 budget in April 2019, he said Australia was “back in the black,” with a A$7.1 billion ($4.6 billion) surplus forecast this financial year. But the government revised its surplus forecast to A$5 billion ($3.2 billion) in December — before devastating wildfires and the coronavirus hit the Australian economy.

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