The economy is set to crash harder than at any time since the Great Depression, according to new forecasting by the global accountancy firm, Deloitte.
As unemployment rises, government tax revenue, personal spending and company profits will all be hit hard, the company's Australian economics team reckons.
The economists calculate that the economy's output in the upcoming financial year will be what they call a "jaw-dropping" $200 billion less than expected before the virus hit.
The researchers forecast a slow fall in unemployment after the steep rise which is on the way.
They cite three main reasons for a sluggish recovery:
- "Families and businesses have had body blows to their confidence, their income, and their wealth so they'll be more cautious about taking risks."
- Interest rates can't go any lower so the Reserve Bank can't prompt spending with cuts.
- And other countries may buy Australian exports but at much lower prices.
The economists warn that they could be wrong because "the uncertainties are truly enormous".
The result of steeply rising unemployment and the current increase in government spending is a widening budget deficit as tax revenues fall and out-goings increase.
The firm's economists, however, are not that alarmist about this jump in the deficit because they think the federal finances were not in as bad a shape as those in other countries, particularly the US.
And they applaud the current increase in spending. "Most of those dollars relate to the current six months, and mean the incomes of families and the profits of businesses will be about one third stronger across these six months than they'd otherwise be."
They take Paul Keating's famous phrase, "the recession we had to have", and say it applies to the upcoming situation.
They argue that the relatively healthy government finances "gave us political permission to mount a bipartisan fight to protect lives.
"That fight for lives runs up debt. In turn, that raises fairness issues, because that debt is left to future generations.
"Yet the big spend now limits the rise in unemployment, which usually hits the young hardest of all, meaning the livelihoods of the young are the biggest beneficiaries of today's emergency spending.
"So, although the young are indeed left with the debt, they are still better off than the alternative of a 'lost generation' of work opportunities."