The budget deficit in the 2021 financial year is $80 million better than expected, sitting at $134.2 billion, Treasurer Josh Frydenberg said on Thursday.
The underlying cash deficit compares with a forecast deficit of $213.7 billion at the time of the 2020-21 budget, and a forecast deficit of $161 billion at the time of the 2021-22 budget, the Treasurer said at a press briefing.
The better-than-expected figures, he said, are a direct result of less people on welfare and more people in work.
“Since May of last year, more than one million new jobs have been created and the unemployment rate has fallen below 5 per cent for the first time in a decade,” the Treasurer said.
Net debt too was lower than projected at $592.2 billion (28.6 per cent of GDP), at the end of 2020-21 – $25.3 billion below the sum forecast at the time of the 2021-22 budget and $111 billion less than what was originally estimated in the 2020-21 budget.
“This primarily reflects the decreased borrowing requirement due to the improvement in the underlying cash balance stemming from the stronger-than-expected economic recovery from the COVID-19 pandemic,” the Treasurer said.
“Despite our increased debt levels, they remain lower than many comparable nations, with the average of gross debt to GDP ratios for G7 economies being above 100 per cent of GDP.”
According to Mr Frydenberg, severe economic contraction was avoided as a result of the $311 billion in economic and health support to Australian households and businesses, which was made possible by the country’s strong fiscal position going into the pandemic.
“Having maintained our AAA credit rating from the three leading credit agencies, the government’s effective fiscal management of the pandemic has meant that Australia’s downturn in 2020 was less severe than the majority of other OECD countries.
“This has ensured the economy is in a position to bounce back rapidly from current economic headwinds,” the Treasurer continued.
“This puts Australia on a more sustainable fiscal trajectory, particularly as we move closer to our nationally agreed targets of 70 to 80 per cent vaccination rates, which underpin the safe reopening of our economy.”
