Treasurer warns second lockdown will devastate economy
Josh Frydenberg has pleaded with Australians to follow the guidelines, setting out the huge cost of another shutdown.
Treasurer Josh Frydenberg says the economy will expand by nearly $10 billion a month once COVID-19 restrictions are lifted, but he's warned Australians of the huge cost if a second lockdown is needed.
Mr Frydenberg was originally scheduled to deliver his second budget tonight, but instead outlined the massive impact to the economy of the coronavirus pandemic.
Calling it a "one in a hundred year event" that has put the Australian way of life on hold, the treasurer said COVID-19 was a health and economic shock, the likes of which the world has never seen.
National cabinet met last week to layout the framework to re-open the economy, with a three-stage plan that each state will work through at its own pace.
Mr Frydenberg told parliament that the easing of restrictions will make a huge difference to the economy.
"Treasury estimates that with the restrictions lifted under the three separate stages, 850,000 people will be back at work," he said.
"More than half of those workers will come from three sectors, with 338,000 jobs in accommodation and food services, 76,000 jobs in arts and recreation, and 71,000 jobs in transport, postal and warehousing.
"Treasury estimate as a result of easing the restrictions in line with stages one, two and three, GDP will increase by $9.4 billion each month."
But the treasurer pleaded with Australians not to flout the restrictions that are still in place, warning that any need to re-impose lockdown laws would come at a massive cost to the economy.
"If our largest state, New South Wales, had to reimpose restrictions, equivalent to those in place before the May 8 national cabinet meeting, it will cost its economy around $1.4 billion per week," Mr Frydenberg said.
"For Victoria, the cost would be around $1 billion. In Queensland, $800 million, in Western Australia, $500 million, in South Australia $200 million, in Tasmania $100 million, in the ACT, $100 million, and in the Northern Territory, $40 million per week.
"This is the economic cost we all have to bear if we fail to act."
With the $1500 JobKeeper program scheduled to finish in September, Mr Frydenberg warned that the extra assistance can't continue indefinitely.
The treasurer said there is "no money tree" and noted there will be a significant increase in government debt that will take many years to repay.
While the latest budget figures only take into account the early weeks of the COVID-19 lockdown, the budget deficit to the end of March was $22.4 billion, nearly $10 billion worse than forecast.
That figure is expected to significantly worsen when April is taken into account, with the treasurer confirming the numbers for the June quarter will be worse than ever seen in Australia.
"Treasury is forecasting GDP to fall by over 10 percent in the June quarter, which would represent our biggest fall on record," he said.
"At $50 billion, this is a loss equivalent to the total quarterly production of South Australia, Tasmania, the Northern Territory and the ACT.
"Treasury is forecasting the unemployment rate to reach around 10 percent, or 1.4 million unemployed in the June quarter.
"The five percentage point increase in the unemployment rate is expected to occur over three months, compared to the three years it took to unemployment rate to rise by the same amount in that devastating period of the early 1990s."
Mr Frydenberg ruled out raising taxes to fill the budget black hole, saying the proven path for paying back debt is through growing the economy through productivity-enhancing reforms.
The Opposition has branded the economic update a "missed opportunity", saying the situation was already dire before the pandemic.
"The economy was already weaker than what they wanted us to believe," Shadow Treasurer Jim Chalmers said.
"Even before the fires, even before this coronavirus, wages and living standards were already stagnant.
"Work was already too precarious and too insecure, for too many people, for too long."
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