The Australian government’s “Intergenerational Report 2021” forecasts the budget will remain in deficit for at least another 40 years, a departure from the ruling Liberal-National coalition’s long-established “debt-and-disaster” rhetoric.
“The economic crisis associated with the COVID-19 pandemic has placed significant demands on public finances in Australia and around the world,” the report said.
“While Australia’s stronger-than-expected economic recovery has flowed through into the fiscal position, the effects of the pandemic on the budget are expected to remain into the long term.”
Prime Minister Scott Morrison last year ditched his government’s obsession with budget surplus in the wake of the pandemic and announced a massive fiscal stimulus plan which led to a record deficit in 2020/21 financial year.
Australia’s economy bounced back strongly from its first recession in three decades in the second half of last year helped by earlier-than-expected reopening from coronavirus shutdowns and massive monetary and fiscal stimulus.
“The economic recovery is well underway, but some effects from the pandemic will persist,” the report says.
Australia now expects its population to total 38.8 million by 2061, down from its last forecast in 2015 when it saw it hitting 40 million by 2056. Its population currently stands at 26 million.
“This is the first time there has been a downward revision of the long-term population projections in an intergenerational report,” Treasurer Josh Frydenberg’s said in his speech.
“This means the economy will be smaller and Australia’s population will be older than it otherwise would have been, with flow-on implications for our economic and fiscal outcomes.”
Responding to questions following his speech, Frydenberg reiterated Australia would only open its international borders if it is safe to do so, suggesting no urgency to bring in overseas visitors and migrants.