Australia Treasurer Josh Frydenberg said the country’s budget balance had turned into a massive deficit of AUD 85.8B, or 4.3% of GDP, in the fiscal year ended June 2020. The deficit is expected to widen further to AUD 184.5B in fiscal 2020-21. Gross debt is projected to rise from AUD 684.3B in 2019-20 to AUD 851.9B in 2020-21.
He added that GDP could have falling by -7% in June quarter. GDP is expected to drop -0.25% in fiscal 2019-20 and -2.25% in fiscal 2020-21. Unemployment rate is expected to climb from 7.0% to 8.75% in 2020-21, and would probably hit 9.25% by Christmas this year.
S&P Global Ratings said Australia’s AAA credit rating could withstand the large widening in budget deficit as projected. The rating reflects the expectation that the economy will begin to recover from recessing during fiscal 2021. Nevertheless, “risks to our rating remain tilted toward the downside as the effects of the COVID-19 pandemic and government responses on the economy, budget, and financial markets evolve.”
