Invest
PBO predicts $800bn budget deficit
The fiscal impact of the COVID-19 pandemic is tipped to extend over until 2030, leaving Australia in an $800 billion hole, the Parliamentary Budget Office has stated.
PBO predicts $800bn budget deficit
The fiscal impact of the COVID-19 pandemic is tipped to extend over until 2030, leaving Australia in an $800 billion hole, the Parliamentary Budget Office has stated.
With the October budget just around the corner, the Parliamentary Budget Office (PBO) has revealed that government net debt in 2029-30 could be between 14 and 24 per cent of GDP (up to $800 billion) higher than it would have been pre-COVID.
“The future economic and fiscal impact of the COVID-19 pandemic remains highly uncertain, and recent forecasts have had particularly short shelf lives due to the rapidly changing nature of the situation,” the PBO said. “It is clear, however, that the impact will be major and extend over the medium term.”
The debt will rise due to lower receipts from slower economic growth and the significant policy response through to 2021. The PBO’s new baseline scenario is also 4 per cent higher than its June outlook due to the impact of lower migration on Australia’s future population – but other than permanently lower price level, no other enduring economic impact from the downturn is factored into the scenarios.
“Any additional ongoing negative impact on economic growth, such as on workforce participation rates or productivity growth, could result in a further significant deterioration in fiscal aggregates,” the PBO said, adding that the government’s COVID policy responses are also assumed to be temporary.
Treasurer Josh Frydenberg’s “eye-watering” economic update warned that the budget deficit would rise to $85.8 billion in 2019-20 and $184.5 billion in 2020-21 prior to Victoria reimposing lockdown restrictions, which are now expected to cost the economy significantly more in lost productivity and lead to greater stimulus spending.
“Even since we put this update to government, things have deteriorated in a major state,” Treasury secretary Steven Kennedy told the Senate COVID committee, adding that the constraints imposed – including border restrictions in Queensland and continuing lockdowns in Victoria – will mean “growth will be lower, employment will be lower and unemployment will be higher”.
“People can lose confidence and have concerns about what they’re seeing unfolding, even in other parts of the country,” Mr Kennedy said. “The community having confidence in the virus being well managed will matter enormously for economic activity,” he said.
The Parliamentary Budget Office’s modelling assumes that Victoria’s restrictions are lifted in short order and that no other states go into lockdown.
RELATED ARTICLES
About the author
About the author
Economy
RBA's hawkish stance reflects inflation concerns, State Street economist comments
In a recent statement, the Reserve Bank of Australia (RBA) has signaled a hawkish stance on interest rates, drawing insights from financial experts about the implications for Australia's economic ...Read more
Economy
Navigating the inflation maze: How CFOs can outsmart economic hurdles in Australia
Fresh inflation data have cooled expectations of near-term rate cuts in Australia, intensifying pressure on margins, capital allocation and demand. Rather than wait for monetary relief that may not ...Read more
Economy
Inflation concerns rise as Australia's CPI climbs to 3.8% in October
Australia's latest Consumer Price Index (CPI) figures have sent ripples through the economy, with headline inflation accelerating to 3.8% year-on-year in October, up from 3.6% in September. The data, ...Read more
Economy
October CPI results pose challenges for RBA’s monetary policy stance
In a surprising turn of events, the October Consumer Price Index (CPI) data has raised eyebrows among economists and market strategists, revealing stronger-than-expected inflationary pressures in ...Read more
Economy
Global deal activity declines by 6% amid economic uncertainty, reports GlobalData
In a year characterised by economic turbulence and evolving market conditions, global deal activity has witnessed a notable downturn during the first ten months of 2025. According to GlobalData, a ...Read more
Economy
Australia’s softening labour market puts another RBA cut in play — here’s what business should do now
A four-year high in unemployment has revived expectations the Reserve Bank could deliver another rate cut as soon as November. With quarterly GDP growth running at 0.6 per cent and annual growth at ...Read more
Economy
Rising CPI reinforces RBA’s stance as rate cut expectations remain: State Street
State Street Global Advisors says the Reserve Bank of Australia (RBA) is likely to hold its current policy outlook following the release of September quarter inflation data, which showed an unexpected ...Read more
Economy
NSW SES boosts tsunami preparedness ahead of World Tsunami Awareness Day
As World Tsunami Awareness Day approaches on 5 November, the New South Wales State Emergency Service (NSW SES) is ramping up efforts to enhance tsunami preparedness along the east coastRead more
Economy
RBA's hawkish stance reflects inflation concerns, State Street economist comments
In a recent statement, the Reserve Bank of Australia (RBA) has signaled a hawkish stance on interest rates, drawing insights from financial experts about the implications for Australia's economic ...Read more
Economy
Navigating the inflation maze: How CFOs can outsmart economic hurdles in Australia
Fresh inflation data have cooled expectations of near-term rate cuts in Australia, intensifying pressure on margins, capital allocation and demand. Rather than wait for monetary relief that may not ...Read more
Economy
Inflation concerns rise as Australia's CPI climbs to 3.8% in October
Australia's latest Consumer Price Index (CPI) figures have sent ripples through the economy, with headline inflation accelerating to 3.8% year-on-year in October, up from 3.6% in September. The data, ...Read more
Economy
October CPI results pose challenges for RBA’s monetary policy stance
In a surprising turn of events, the October Consumer Price Index (CPI) data has raised eyebrows among economists and market strategists, revealing stronger-than-expected inflationary pressures in ...Read more
Economy
Global deal activity declines by 6% amid economic uncertainty, reports GlobalData
In a year characterised by economic turbulence and evolving market conditions, global deal activity has witnessed a notable downturn during the first ten months of 2025. According to GlobalData, a ...Read more
Economy
Australia’s softening labour market puts another RBA cut in play — here’s what business should do now
A four-year high in unemployment has revived expectations the Reserve Bank could deliver another rate cut as soon as November. With quarterly GDP growth running at 0.6 per cent and annual growth at ...Read more
Economy
Rising CPI reinforces RBA’s stance as rate cut expectations remain: State Street
State Street Global Advisors says the Reserve Bank of Australia (RBA) is likely to hold its current policy outlook following the release of September quarter inflation data, which showed an unexpected ...Read more
Economy
NSW SES boosts tsunami preparedness ahead of World Tsunami Awareness Day
As World Tsunami Awareness Day approaches on 5 November, the New South Wales State Emergency Service (NSW SES) is ramping up efforts to enhance tsunami preparedness along the east coastRead more
