The economic and fiscal update shows the impact of the COVID-19 pandemic on Australia’s finances, revealing that the government’s economic support for workers, households and businesses has cost around $289 billion, or the equivalent of 14.6% of GDP.
Coupled with declines in taxation receipts of $31.7 billion in 2019-20 and $63.9 billion in 2020-21, this has significantly affected the budget position. Payments variations, including in demand driven programs, also increased by $15.7 billion, predominantly as a result of the impact of the COVID-19 pandemic on the economy.
The underlying cash balance is forecast to decrease from balance in 2018-19 to a $85.8 billion deficit in 2019-20 and a $184.5 billion deficit in 2020-21.
Debt levels have increased significantly as a result of the COVID-19 pandemic, however Australia continues to have a low level of debt-to-GDP compared to other countries. Net debt is expected to be $488.2 billion (24.6% of GDP) at 30 June 2020 and increase to $677.1 billion (35.7% of GDP) at 30 June 2021.
As a result of the pandemic, around 709,000 jobs were lost across the country in the June quarter. The unemployment rate is forecast to peak at around 9.25% in the December quarter.
The economic response includes the $85.7 billion JobKeeper payment, expanded eligibility for income support payments, the Coronavirus supplement, support payments for households, temporary cash flow support for employers, and increasing and expanding access to the instant asset write-off.
More than 960,000 businesses and not-for-profits and more than 3.5 million individuals have been covered by the JobKeeper payment. As at 16 July, payments totalled over $30 billion. JobKeeper and the supplements have been extended beyond the initial expiry date, although slightly reduced.
The Boosting Cash Flow for Employers measure has provided more than $16 billion in payments to more than 750,000 employers across Australia as at 16 July 2020. The government is also investing $2 billion for retraining and upskilling in sectors with job opportunities. This includes the $1 billion JobTrainer Fund, jointly funded with the states and territories, to provide up to an additional 340,700 training places to help school leavers and job seekers access short and long courses.
Also the Supporting Apprentices and Trainees wage subsidy is to be expanded, which has supported around 83,000 apprentices and trainees, and around 48,000 employers. As at 16 July 2020, payments totalled $377.6 million.
The government has boosted Australia’s testing capacity to meet the challenge of the COVID-19 pandemic, including by establishing dedicated Medicare-funded pathology tests and dedicated respiratory clinics, with coverage of around 97% of the population.
It is also providing $3.7 billion to build the hospital system capacity for the COVID-19 response, including the National Partnership Agreement on COVID-19 to fund half of the costs incurred by the states and territories in diagnosing and treating patients with COVID-19 and minimising the spread of the disease as well as the partnership to harness private hospital capacity.
To ensure access to essential health services, the Government has enabled whole-of-population Medicare subsidised telehealth services and provided $619.1 million to support bulk billing and $54.8 million for additional support to enable GPs to continue to provide essential face-to-face medical services. It has also provided $122.1 million to support the mental health and wellbeing of Australians during the COVID-19 pandemic.
In addition to the National Partnership Agreement on COVID 19, the government is investing $131.4 billion in funding for Australia’s public hospitals, an increase of 30% over the previous five years, through the 2020-25 National Health Reform Agreement.
It is also providing $18.3 billion in new and existing funding over the next five years to ensure quality pharmaceutical services through the Seventh Community Pharmacy Agreement.
Newly announced measures
JobKeeper is being extended at a tapered level for an additional 6 months, from 28 September 2020 until 28 March 2021, to provide further support to those businesses that continue to be significantly affected by the economic downturn.
Income support for individuals will also continue with the Coronavirus Supplement being extended to 31 December 2020, at a lower payment rate.
Individuals who are still financially impacted by the COVID-19 pandemic will also have more time to apply for the early release of up to $10,000 of superannuation, with the application period extended from 24 September 2020 to 31 December 2020.
The JobTrainer Skills Package establishes the JobTrainer Fund to provide additional low and no fee training places for job seekers and school leavers, and extends the Supporting Apprentices and Trainees wage subsidy for a further 6 months to 31 March 2021 and expands it to medium-sized businesses from 1 July 2020.
The government is also extending the COVID-19 SME Guarantee Scheme to loans written until 30 June 2021, and making targeted amendments to ensure that the loans available suit the evolving needs of SMEs.