Lower jobKeeper demand and booming iron ore prices lead to a $ 16 billion improvement in the federal budget

Few of the people who need JobKeeper in addition to booming iron ore export prices have achieved a $ 16 billion improvement in net federal budget profits, but the government is still on track to deliver a record deficit.

The economy appears to be recovering faster than the federal government had anticipated just weeks ago when the budget was distributed in October.

The Treasury Department has forecast that the economy will contract this fiscal year, in line with the country sliding into its first recession in nearly three decades.

But MYEFO’s Mid-Year Economic and Financial Outlook now expects GDP to grow by 0.75 percent, up from the earlier projected decline of 1.5 percent.

“Australia is outperforming all advanced economies,” Treasurer Josh Freidenberg said when releasing the updated budget numbers.

The improvement in the budgetary condition is due to higher iron ore prices and more people returning to work than expected.

The budget estimated that 2.2 million Australians would receive the government’s jobs keeper subsidy in December.

That has now been revised down to 1.6 million people, and the total program is now expected to cost $ 90 billion, down from $ 101.3 billion.

MYEFO expects an official unemployment rate of 7.25 percent at the end of this fiscal year, the same as the budget forecast.

The government expects unemployment to reach a peak of 7.5 percent in the first three months of 2021. It had previously expected it to reach 8 percent.

“With 734,000 jobs created over the past six months, the job brand has performed better than we expected,” said Mr Frydenberg.

The Treasury Department predicts that unemployment will decline further to 6.25 percent by mid-2022 and to 5.25 percent, to return to pre-pandemic levels, two years later.

“We’ve come a long way – far from the Treasury’s initial estimate that the unemployment rate could reach 10 percent or 15 percent without JobKeeper,” he said.

The COVID-19 pandemic has created Australia’s biggest economic challenge since the Great Depression.

Rising government income prompted the Treasury to project a deficit of $ 197.7 billion at the end of this fiscal year.

This would remain a record deficit in the post-war period but below the October budget estimate of $ 213.7 billion.

“There is light at the end of the tunnel, but there is still a long way to go in Australia’s economic recovery,” said Friedenberg.

More is coming.