The Victorian unemployment rate is predicted to peak at 9 per cent in September, as the state struggles to contain the coronavirus, Victorian Treasurer Tim Pallas revealed on Thursday.
That equates to around 200,000 Victorians, with 160,000 of them losing their jobs in the June quarter.
The Victorian economic update also revealed the worldwide recession was reducing demand for the state’s goods and services.
Gross state product is also predicted to fall by 5.25 per cent this year – 11 per cent lower in the June and September quarters, relative to last year’s budget forecasts.
“These predictions aren't quite as grim as those in April, but, of course, there's no solace to the many thousands of Victorians who would be feeling the direct and immediate impacts of these changes upon them,” Pallas said.
Government revenue streams like taxation revenue and GST have also taken a hit, with Treasury predicting these to be around $2.5 billion lower in 2019-20 and around $6 billion lower in 2020-21.
The update comes weeks after the state government fired off a $534 million stimulus package for Victorian businesses, as Pallas foreshadowed a rocky road to recovery.
“We are expecting that there will be literally billions of dollars written off the expected size of the Victorian economy,” Pallas said at the time.
Now the state government confirmed reduced revenue and the government's “unprecedented investment in support measures means” would see the Victorian budget return to an operating deficit of $7.4 billion in 2019-20, Pallas said.
Victoria’s update follows confirmation from the Department of Finance that the nation’s deficit had hit $40 billion in April, with the Victorian lockdown adding another $3.3 billion to that tab.
“That’s the harsh reality of this pandemic,” Treasurer Josh Frydenberg said.
“The coronavirus has required the government to spend unprecedented amounts of money to support people in need.”
Shadow Treasurer Jim Chalmers said the government was “pulling a swifter”, saying the vast majority of Australia’s debt had accumulated prior to the pandemic.
“The Government will...try to pretend that all of the red ink in the budget as a consequence of the virus when the truth is the vast majority of the debt had piled up before this,” Chalmer said.
“What we need to see is that an admission that it had more than doubled beforehand, and more importantly, a plan for jobs and the recovery into the future when all of this otherwise welcome support runs out.”
Frydenberg will be delivering the government’s mid-year economic and fiscal update on Thursday.
“You will see eye watering numbers around debt and deficit,” he said. “Numbers that Australians have never, ever seen before.”
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