State border closures sparked by a Sydney coronavirus outbreak could blow a hole in the federal budget.

The mid-year economic update has been predicated on state borders remaining open into next year.

But Queensland and Western Australia have toughened interstate travel restrictions in response to the latest coronavirus cluster in NSW.

Tasmania, Victoria and the Northern Territory have also tightened the screws.

Federal Finance Minister Simon Birmingham acknowledged the coronavirus outbreak could derail the national economic recovery.

“It depends on how it unfolds,” Senator Birmingham said on Friday.

“The budget assumptions do still assume there will occasionally be instances like this. We haven’t assumed that COVID has gone from the face of Australia forever.

“We do recognise these threats, these uncertainties remain, and that’s built into those assumptions there.”

• Michael Pascoe: What the government isn’t telling us

The budget forecasts are predicated on any coronavirus outbreaks being locally contained, and state borders remaining open throughout 2021.

But the states’ swift response to the latest outbreak has cast a shadow over those assumptions.

Forecasts in the mid-year update were adjusted to reflect lower unemployment, stronger economic growth and an improved budget bottom line, compared to assumptions made in the budget 10 weeks ago.

Treasurer Josh Frydenberg said border closures would have a direct impact on jobs, as well as the daily lives of Australians.

Mr Frydenberg urged premiers and chief ministers to be proportionate in their response to the latest outbreak.

“The medical advice must determine the course of action that is taken here,” he said.

-AAP