The "eye-watering" figures contained in the Morrison government's budget update could blow out even further if Australia's coronavirus spikes continue to spiral out of control.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Treasurer Josh Frydenberg revealed on Thursday the largest budget deficit in 70 years.
The budget, which was in balance in 2018-19, deteriorated to an $85.8 billion deficit in 2019-20, with an $184.5 billion deficit forecast in 2020-21.
Tax receipts fell $31.7 billion, and are expected to fall further in 2020-21 by another $63.9 billion.
Net debt is expected to be $488.2 billion - 24.6 per cent of gross domestic product - at June 30, 2020 and rise to $677.1 billion by June 2021 - 35.7 per cent of GDP.
The economy was tipped to start to recover during the September quarter as restrictions eased.
However the numbers were predicated on Victoria's lockdown easing in six weeks and the country re-opening along the roadmap laid out by government one month ago.
The update also assumed that Australia's borders would reopen on January 1.
Mr Frydenberg said the numbers, while "eye-watering", were "based on the decisions we've taken and based on what we know at the time".
READ MORE:
However former Finance Department deputy secretary and Pegasus Economics director Stephen Bartos said if the NSW outbreak got worse, it would "blow all these forecasts up".
"This is a statement about what happens to the economy if we get the virus under control and things get back to normal," Mr Bartos said.
"It assumes we will have a much lower level but still net positive migration next year when restrictions are lifted and people are allowed back into the country, which might happen but equally it might not.
"It assumes the rest of the world starts to have control measures that work, which is super-heroic in terms of an assumption, because the rest of the world seems to be falling apart."
GDP was predicted to increase by 1.5 per cent in the September quarter based off improving household consumption.
That was "optimistic", Mr Bartos said.
The other "super hopeful assumption" was wages continuing to grow at 1.75 per cent and 1.25 per cent respectfully.
"At a time when people will accept the halving of their income [to keep their jobs], this seems absurdly optimistic," Mr Bartos said.
The only assumption which was not optimistic was business investment, which is tipped to decline by 6 per cent in 2019-20 and a further 12.5 per cent in 2020-21.
"That's realistic," Mr Bartos said.
Mr Bartos said there was a "good chance" the statement would be out of date in a fortnight.
"If we see for example widespread community transmission in NSW then there's a lot of assumptions in this statement that will have to be revised," he said.
Labor's Treasury spokesman Jim Chalmers said it remained to be seen whether the assumptions were accurate.
"Even under the assumptions they have adopted here, we are talking about an extra 240,000 Australians expected to join the unemployment queue between now and Christmas. That in and of itself should be a spur to action for the government," Dr Chalmers said.
Mr Frydenberg denied the assumptions in the update were optimistic.
"They assume we can be effective in dealing with the virus," Mr Frydenberg told Sky.
Ben Phillips, an associate professor at the ANU Centre for Social Research and Methods, said the wages assumption was "as good as guess as any" given how volatile the market and economy was.
"The concern would be what happens with Victoria with the virus down there, if it remains contained these numbers could be sensible," Associate Professor Ben Phillips said.
Associate Professor Phillips' main concern was the resumption of the mutual obligation reporting and liquid assets test for JobSeekers, announced this week after the review of the JobKeeper program and other coronavirus support stimulus measures.
"There's just not that many jobs around at the moment, particularly in Victoria where it's actually dangerous to be out looking for a job at the moment," Associate Professor Phillips said.
"I just think it's too premature to be going down the road of reintroducing mutual obligations at this stage."
