SYDNEY–Australia’s federal government forecast a record budget deficit as spending swells to counter the economic downturn brought on by Covid-19.
The budget deficit will balloon to $184.5 billion Australian dollars (US$131.7 billion) in the year ending June 30, 2021, up from A$85.8 billion in the prior year, Treasurer Josh Frydenberg said Thursday.
The government’s economic stimulus has included a wage subsidy intended to limit job losses during lockdowns. It has also increased support for the unemployed and given assistance to badly affected industries such as education and tourism.
Mr. Frydenberg said the government has provided economic support for workers, households and businesses of around A$289 billion, or about 14.6% of gross domestic product.
The big jump in spending was coupled with a decline in taxation receipts of A$31.7 billion in 2019-20 and an expected A$63.9 billion decline in 2020-21, he said.
Australia’s economy has slid into its first recession in 29 years with the outlook still clouded by a significant second wave of infections affecting Melbourne, with hot spots also breaking out in Sydney.
On a calendar-year basis, GDP is predicted to grow by 2.5% per cent in 2021 after a fall of 3.75% in 2020.
The unemployment rate is forecast to peak at around 9.25% in the fourth quarter of this year, although job market conditions are expected to strengthen next year.
The Reserve Bank of Australia has cut interest rates to record lows, set a target for three-year government bonds and bolstered liquidity in financial markets.
RBA Governor Philip Lowe has indicated there is little more the central bank can do to lift the economy. He has said that government spending will need to do the bulk of the heavy lifting in the economy for some time to come.
Write to James Glynn at james.glynn@wsj.com
Corrections & Amplifications
This story was corrected at 10:29 p.m ET. The original in the second paragraph ommitted the Australian dollar sign fron the 85.8 billion figure along with the other figures throughout the story.
The budget deficit will balloon to 184.5 billion Australian dollars (US$131.7 billion) in the year ending June 30, 2021, up from A$85.8 billion in the prior year, Treasurer Josh Frydenberg said Thursday. “Australia Forecasts Record Budget Deficit in Response to Pandemic,” at 0142 GMT, ommitted the Australian dollar sign from several figures.