SYDNEY (Reuters) – Australia’s government will run record budget deficits this year and next as it spends big on stimulus and infrastructure to cushion the economy from the coronavirus, Prime Minister Scott Morrison said on Monday, warning of tough times ahead.
Announcing another A$1.5 billion ($1.02 billion) on infrastructure and fast-track approval for a range of projects, Morrison also said Australia was coming through the virus better than most of its peers, as states launched a further easing of lockdown restrictions.
The government is fast-tracking approvals for 15 projects, including the expansion of BHP Group’s <BHP.AX> Olympic Dam, an undersea electricity connection, and water and rail work which it estimated would generate around 66,000 jobs.
“There is a mountain yet to climb,” Morrison told an economic conference. “Compared with the midyear update, it is expected that up to A$100 billion of economic activity has been lost this year.”
“It will take us an estimated two years at least just to get back to the level we were at prior to the fall from pre-COVID.”
Figures out on Monday underlined the damage done to tourism, with international visitors falling by almost 100% in April as the borders were closed. They are likely to remain shut for some time, though Australia is in talks with New Zealand to open a travel bubble between the two nations.
Morrison has already conceded the economy is in its first recession since the early 1990s as whole sectors were closed down for April and much of May, eating into tax receipts and devastating government finances.
He said the budget, which had been almost back in the black early in 2020, would suffer a record deficit this year and next. While massive stimulus packages had been necessary, Morrison warned they would be temporary and spending would have to be strictly controlled over time.
($1 = 1.4652 Australian dollars)
(Reporting by Wayne Cole; Editing by Ana Nicolaci da Costa)