Prime Minister Scott Morrison has downplayed the chance of extending coronavirus support measures beyond September, but warned the pandemic will cost the economy $100 billion in 2020 alone.
Addressing the Committee for Economic Development of Australia in Canberra on Monday, Mr Morrison said Australia’s response to the pandemic had exceeded “our fears and even our hopes”.
The “undoubtedly world class” health response has enabled the country to lift restrictions faster than anticipated, he said.
As a result, business and consumer confidence is returning, and the impact on Australia’s economy is forecast to be the third-smallest among the 37 countries of the the Organisation for Economic Co-operation and Development.
“But the hit to our economy, we must understand, is significant, despite our relatively stronger performance – and the road ahead will be very hard,” Mr Morrison said.
There is a mountain yet to climb.”
Mr Morrison said the virus had cut economic activity by $100 billion in 2020.
He said it would take at least two years for the economy to return to pre-pandemic levels.
“That’s why we have a plan to lift the growth,” Mr Morrison said.
“We need to lift our economic growth rate by more than 1 percentage point above trend to beat the expected pre-COVID GDP position by 2025 – to catch back up to where we were before COVID hit.”
Mr Morrison said the budget would have record deficits for two years, thanks to hefty government spending and a massive fall in tax receipts.
He said the government would consequently need to reexamine its current expenditure – though he said “this does not mean stepping back from our commitment to essential services and addressing the further needs in aged and disability care”.
There will always be a case for spending more and spending for longer – and there are plenty of people who are happy to make that case – but it is not a wise or responsible course,” Mr Morrison said.
Over-extending on the fiscal supports puts those longer-term and medium-term supported services at risk.”
He later added: “Neither excessive austerity nor higher taxes are the path that our government will pursue.”
Mr Morrison said his government will instead focus on deregulation and increased infrastructure spending to drive the recovery – using the address to announce a $1.5 billion cash boost for “shovel-ready” infrastructure projects identified by the states and territories.
The government plans to fast-track 15 projects, including an inland rail project from Melbourne to Brisbane; the Marinus undersea electricity link between Tasmania and Victoria; the Olympic Dam extension in South Australia; emergency town water projects in NSW; and road, rail and iron ore projects in Western Australia.
The Prime Minister’s speech came just one week after the government ended its free childcare policy – although he has said measures such as the JobKeeper wages boost will remain legislated until the end of September. The doubling of the payment to the unemployed, JobSeeker, is also due to run out then.
Monday’s speech also followed an address to the National Press Club in which Mr Morrison highlighted industrial relations reform and investment in skills and education as central to his recovery plan.