The attached note looks the Australian Government’s Economic and Fiscal Update.
The key points are as follows:
- The Government expects the federal budget deficit to peak at a record $184.5bn this financial year. That’s around 9.7% of GDP, its highest since the end of WW2.
- Ultimately, we expect it to be around $220bn this financial year as the Government unveils more stimulus and revenue recovers more slowly than projected by the Government.
- The budget and associated debt blowout is unlikely to cause a major problem as Australian public debt is relatively low, borrowing costs are very low, the Government is borrowing in Australian dollars & it’s not dependent on foreign capital. Letting the budget deficit rise is the right thing to do in order to support the economy through this (hopefully) once in a century pandemic.