Senator the Hon. Simon Birmingham
Minister for Finance
Leader of the Government in the Senate
Senator for South Australia
The Hon. Josh Frydenberg MP
Date: Tuesday, 11 May 2021
Australia entered the crisis from a position of economic strength having brought the Budget back to balance for the first time in 11 years.
This provided us with the fiscal firepower to support Australians when they needed it most.
As part of our COVID-19 response the Government has committed $291 billion or 14.7 per cent of GDP in direct economic support for individuals, households and businesses.
The Australian economy has rebounded at its fastest pace on record over the latter half of last year, outperforming all major advanced economies in 2020.
With JobKeeper having played its role and nearly one million jobs added since May 2020, there are now more people in work than ever before.
The 2021-22 Budget will consolidate these gains and put us on course for the unemployment rate to fall below 5 per cent, reaching 4¾ per cent by the June quarter 2023.
Our economic response to COVID-19 has come at a significant fiscal cost.
The COVID-19 recession will see the deficit reach $161.0 billion in 2020-21, improving to $106.6 billion in 2021-22, before further improving to $57.0 billion in 2024-25.
The 2020-21 deficit is $52.7 billion lower than was expected just over 6 months ago at last year’s Budget, assisted by more Australians being in work and less people on welfare.
While the Government’s actions to protect lives and livelihoods has come at a cost, the Budget demonstrates that our fiscal position remains strong and sustainable with Australia’s debt remaining low by international standards.
Gross debt is expected to be lower at 30 June 2021 compared to the forecast in the 2020-21 Budget down from an expected $872.0 billion or 44.8 per cent of GDP to $829.0 billion or 40.2 per cent of GDP.
Gross debt will also be lower in every year over the medium term compared to the 2020-21 Budget and stabilise at a lower level at around 51 per cent of GDP.
Net debt will increase to $617.5 billion or 30.0 per cent of GDP at 30 June 2021 before peaking at 40.9 per cent of GDP at 30 June 2025, and declining to 37.0 per cent of GDP at the end of the medium term. This compares to the forecast peak of 43.8 per cent of GDP from last year’s Budget.
While the euro area has fallen back into recession, Australia is recovering strongly.
The outlook for real GDP growth has strengthened in the near term and real GDP is forecast to grow by 1¼ per cent in 2020-21, rising to 4¼ per cent in 2021-22 and moderating to 2½ per cent in 2022‑23 as the recovery stabilises.
By rebuilding the economy and reducing net debt as a share of the economy we will be in a strong position to secure Australia’s recovery and repair the budget.
The Morrison Government’s economic plan is working.
The 2021-22 Budget sets out the next stage of our plan to secure Australia’s recovery and set Australia up for the future.