- Australia’s federal budget deficit is expected to peak at around $200bn in 2020-21, or around 10% of GDP which will be the highest since the end of WW2.
- This will see net public debt nearly double as a percentage of GDP over the next few years.
- However, the budget stimulus is necessary to avoid an even worse outcome, public debt is relatively low in Australia, the budget support programs will phase down when no longer needed and government borrowing costs are very low. So, the deficit and debt increases are affordable.
- Productivity enhancing economic reforms provide the best approach to help the economy grow and get debt levels back down and this is likely to be the focus in the October Budget.