Australian Treasurer Josh Frydenberg on Friday declared that the government will not embark on budget repair until the unemployment rate falls back below 6 per cent.
With the Australian budget for financial year 2020/21 set to be handed down on October 6, Frydenberg said that paying down the deficit while unemployment remained high would be “damaging” to the economy, reports Xinhua news agency.
The budget deficit for 2020/21 is expected to be more than A$200 billion ($141.1 billion) according to The Australian Financial Review, after the government had announced about A$314 billion or around 15.8 per cent of the GDP in support on economic response measures to the Covid-19 crisis.
Frydenberg said that the budget would break the recovery into two stages, with the first to focus on driving unemployment down.
“It would now be damaging to the economy and unrealistic to target surpluses over the forward estimates – given what this would require us to do in terms of significant increases in taxes and large cuts to essential services,” he said in the Fiscal Strategy Update.
“This would risk undermining the economic recovery we need to bring hundreds of thousands more Australians back to work and to underpin a stronger medium-term fiscal position.”
Australia’s unemployment rate in August was 6.8 per cent, up from 5.1 per cent in February, but Frydenberg said he expected it to rise over coming months due to the lockdown in Victoria and as people re-enter the labour force to look for work.
“It is getting Australians back to work and having profitable businesses hiring and investing that offers the greatest leverage in repairing the budget,” Frydenberg said.
“We will review progress on the economic recovery in each Budget update, but I expect Phase 1 to remain in place until the unemployment rate is comfortably back under 6 per cent.”