Australia’s Budget Deficit Seen Blowing Out to 8.1% of GDP
(Bloomberg) -- Australia’s budget deficit will blow out to A$155 billion ($94 billion) and outstanding government bonds swell to 40% of gross domestic product in fiscal 2021, according to the nation’s largest lender, as Prime Minister Scott Morrison pumps cash into an economy threatened with recession.
The economy will contract by 7.5% and unemployment jump to 7.8% in the current quarter, estimates Gareth Aird, a senior economist at Commonwealth Bank of Australia. The budget shortfall will gape to 8.1% of GDP in the fiscal year starting July 1 and outstanding bonds soar to A$790 billion, he said.
“It is clear that a significant proportion of the domestic economy will remain shut in some capacity through the June quarter and most likely the early part of the September quarter,” Aird said. “At the same time, an unprecedented amount of fiscal and monetary stimulus, as well as industry support, has been unleashed.”
Australia’s government and central bank have unleashed a fiscal-monetary injection of about A$320 billion -- or 16.4% of GDP -- to try to cushion the blow on businesses and households from deteriorating demand and a collapsing labor market. Bloomberg Economics expects the economy will contract 10% in the first three quarters of 2020 in the deepest downturn in 90 years.
Commonwealth Bank forecasts GDP will drop by 3.4% for 2020 as a whole.
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