News Fears of ‘jobless recovery’ as record budget deficit revealed

Fears of ‘jobless recovery’ as record budget deficit revealed

Treasurer Josh Frydenberg is taking cues from Reagan and Thatcher. Photo: AAP
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The startling budget figures unveiled by the federal government have been described as “hard to comprehend”, but even a record deficit is being met with criticism that not enough is being done to rescue Australians from an unemployment black hole.

Mathias Cormann and Josh Frydenberg deliver the budget update on Thursday. Photo: AAP

The unprecedented response to the COVID crisis has left the federal bottom line billions in the red, with a forecast $184.5 billion deficit blowing a massive hole in the 2020-21 budget.

Thursday’s economic update, delivered in Canberra by Treasurer Josh Frydenberg and Minister for Finance Mathias Cormann, was led by the biggest budget deficit since World War II, and what the Treasury department predicted would be “largest annual fall in economic activity on official record.”

“These deficits reveal the real cost to the budget of rejecting lives and livelihoods as a result of the coronavirus,” Mr Frydenberg said.

“Australia is experiencing a health and economic crisis like nothing we have ever seen in the last 100 years”.

Another headline figure was the unemployment rate, tipped to linger above nine per cent even into 2020.

Some 709,000 jobs were lost in the June quarter alone, but Treasury said the government’s intervention and spending measures – $289 billion – saved some 700,000 jobs, keeping the unemployment rate five points lower than it would otherwise be.

The unemployment impact had been hard “particularly for women and young people”, the update said.

Australia’s real GDP has plummeted while the unemployment rate has soared, according to the budget update. Graphic: Treasury

However, the Labor party has turned the blowtorch on the government, claiming the budget update was “incomplete” without a firmer plan to kickstart jobs growth.

“Australians already know the economy is in bad shape – they need to hear what the Morrison government is going to do about it,” said Labor’s shadow treasurer Jim Chalmers and shadow finance minister, Katy Gallagher.

“The scale of the health and jobs crisis demands a serious response from government, but this is not even half a budget update, let alone a plan.”

Opposition members have been pointing out in recent days that, despite the COVID outbreak, much of the debt currently on the federal books was racked up pre-pandemic.

“Scott Morrison shouldn’t pretend that this new record for debt and deficit is all the fault of the virus outbreak, when two-thirds of the debt was accumulated before most people had heard of the coronavirus,” Mr Chalmers and Ms Gallagher said.

“We don’t want to see a jobless recovery where even more Australians are left behind and held back.”

In the past week, the government has announced the extension of the JobKeeper wage subsidy as well as a new ‘JobTrainer’ scheme as part of a $2 billion skills training program.

Labor MP for Perth, Patrick Gorman, said on radio Thursday that the budget figures were “hard for even those of us that track the federal budget very closely to comprehend”.

Despite the grim figures, Treasury painted a slightly optimistic picture for beyond the end of the year, projecting gross domestic product to grow 2.5 per cent in 2021 after plummeting 3.75 per cent in 2020. Economic activity is also projected to spike again, as lockdowns ease.

“Australia has outperformed most advanced economies in terms of both health and economic outcomes to date through this crisis,” the treasury update said.

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Dr Chalmers said the budget update was a missed opportunity. Photo: AAP

Greens leader Adam Bandt also took aim at the government’s figures, claiming the budget update was “based on austerity and fantasy projections”.

For instance, some have raised eyebrows at the update being based on assumptions including that Australia’s ban on international travel will begin easing from January 2021 – far earlier than flagged in recent forecasts from the airline industry.

““This is a forecast based on austerity and wishful thinking. If restrictions aren’t lifted within the government’s optimistic time frame, people will be out of work even longer,” Mr Bandt said.

The Greens MP called on the federal government to double down on “debt-financed public infrastructure”, and public services like free childcare, to jump-start the stuttering job market.

“By investing in nation-building and planet-saving projects, we could guarantee a job for everyone who wants one, but instead the government is choosing a high-unemployment future,” Mr Bandt claimed.

“A World War II-sized deficit requires a World War II response to get people into meaningful, secure jobs.”

Mr Frydenberg gives the budget update. Photo: AAP

Australian Council of Trade Unions president Michele O’Neil also demanded the government outline a stronger strategy for jobs growth.

“People need confidence that Australia isn’t going from recession to depression, so the sooner the government tells people the plan for jobs the better for everyone,” she said.

“No one wants to see people fall through the gaps which is why we need to continue support for JobKeeper and JobSeeker while government creates more secure local jobs and training opportunities.”

When asked about whether Australians would be concerned about the record deficit, Mr Cormann answered “What was the alternative?”.