Horrifying graph shows how debt will soar to $213BILLION by 2021 as the Reserve Bank backs budget blowout to stop Australia suffering economic catastrophe
- Australia looks set to unveil the largest budget deficit it has seen in decades
- Coronavirus pandemic has seen country's debt balloon to about $85billion
- Economists are predicting a deficit $200billion for the next financial year
Australia could be plunged into $213billion of debt within just 12 months thanks to the coronavirus pandemic.
The government had hoped to deliver the first surplus since 2007-08, forecasting a $5billion surplus for 2019-20 and a $6.1billion surplus for the current financial year.
But a horrifying graph shows the government's balance sheet going in the opposite direction.
The country's debt has been ballooning thanks to a drop in revenue and increasing outgoings, with economists now predicting a deficit of more than $200billion for the 2021/22 financial year.
A record deficit of more than $85billion for the current financial year is also expected.
The Reserve Bank has backed the Morrison government's plans to increase debt levels.
The country's debt has been ballooning thanks to the coronavirus pandemic and economists are now predicting a deficit of more than $200 billion for the next financial year - which is -11% of GDP
Australians have been warned to brace for 'eye-watering' national debts when the latest budget numbers are released (Pictured: the Prime Minister meeting businessmen on Monday)
On Tuesday Scott Morrison announced the JobSeeker payment, which currently helps 3.5million Australians, would be reduced in phases as the economy recovers from coronavirus lockdown (pictured: dozens of people lining up outside Centrelink in Melbourne in April)
The bank's governor Philip Lowe said the government needed to use its balance sheet to reduce the severity of the downturn.
'The biggest policy mistake to make at the moment would be to withdraw support too early,' he told the Australian Financial Review.
Dr Lowe said the government was in a good position to keep borrowing and provide fiscal support for a sustainable economic recovery.
'For a country that has got used to low budget deficits and low levels of public debt, this is quite a change.
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'But it is a change that is entirely manageable and affordable, and it's the right thing to do.'
Prime Minister Scott Morrison and Treasurer Josh Frydenberg will update the nation on the budget position on Thursday.
Mr Frydenberg has admitted the country will remain in deficit for some years to come.
'You're going to see eye-watering numbers around debt and deficit, numbers that Australians have never seen before,' Mr Frydenberg told Nine on Wednesday.
Cafes and restaurants were forced to close or offer takeaway only when the coronavirus crisis escalated in March (Pictured: A closed cafe in Melbourne on July 9)
Prime Minister Scott Morrison (pictured on Tuesday) has tempered expectations of big spending commitments on Thursday. He said it was 'about just reconciling the books'
'That's the harsh reality of this pandemic. The coronavirus has required the government to spend unprecedented amounts of money to support people in need.
'We've also taken a big hit on the revenue side because obviously businesses are not making the profits they were, people are not in jobs in the same numbers they were.'
Ahead of the economic update, the government announced an extension of coronavirus job support payments.
The $20.4 billion extension on the JobKeeper and JobSeeker scheme is worth about 1 per cent of GDP.
The payment was due to end on September 27, but instead it will be decreased from $1,500 to $1,200-a-fortnight.
A lower rate of $750-a-fortnight will go to people who worked fewer than 20 hours a week in February, before coronavirus struck.
The two-tiered system has been brought in because one in four casuals are earning more on JobKeeper than when they worked.
From 4 January, the payments will be reduced to $1,000-a-fortnight for full time staff and to $650-a-fortnight for those who worked fewer than 20 hours.
Fewer businesses will be eligible for JobKeeper as they must continue to prove a revenue decline of 30 per cent compared to the period before coronavirus.
Many will not meet this threshold because business has picked up since lockdown ended.
One million people are still expected to receive the payment from January, down from 3.5 million now.
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