Staggering cost of doomsday scenario on Australian economy

Courtney GouldNCA NewsWire
Josh Frydenberg has rejected claims his mid-year budget is too optimistic. NCA NewsWire / Gary Ramage
Camera IconJosh Frydenberg has rejected claims his mid-year budget is too optimistic. NCA NewsWire / Gary Ramage Credit: News Corp Australia

Josh Frydenberg has rejected claims his mid-year budget is too optimistic amid concerns new Covid variants could wreak havoc on the economy.

Treasury’s forecast is based on the premise that Australia will continue on its path to reopening.

It also counts on state premiers staying the course and not being spooked by a rise in cases.

Speaking with Nine, the Treasurer noted the uncertainty but insisted there was no reason to believe the economy wouldn’t bounce back.

MYEFO CANBERRA
Camera IconTreasurer Josh Frydenberg is optimistic the economy will continue to bounce back. NCA NewsWire / Gary Ramage Credit: News Corp Australia

“So, there is a great deal of uncertainty. No one should understate the fact we‘re still in the middle of a pandemic,” he said.

“Given our track record today with our resilient economy and given the momentum we‘re seeing, I believe there is good cause for optimism.”

Labor claims the figures paint too much of a rosy picture of how Australia is tracking, saying the figures show a degree of complacency.

Anthony Albanese Presser
Camera IconShadow treasurer, Jim Chalmers is looking for the ‘best version’ of the economy. NCA NewsWire / John Gass Credit: News Corp Australia

“Government’s forecasts rely on an assumption that they will get everything right when it comes to the management of this pandemic,” shadow treasurer Jim Chalmers told ABC.

“We hope that the best version of the economy emerges in this recovery.”

But Mr Frydenberg said Treasury had also factored in a doomsday scenario where borders were closed and states went back into lockdown.

“We did model a couple of extra scenarios, au upside and a downside scenario,” Mr Frydenberg told Nine.

More lockdowns could cost the Australian economy $20bn.
Camera IconMore lockdowns could cost the Australian economy $20bn. Credit: News Regional Media

“In the downside scenario, we forecast that potentially there could be those localised lockdowns. That could hurt the economy to the tune of around $20bn and see unemployment higher than what has been forecast.

“At the same time, we forecasted an upside scenario, where we‘re able to keep the health outcomes under control and that Australians started to spend more than was forecast in yesterday’s numbers.”

Thursday’s update could be the last set of figures released by the government prior to next year’s federal election – should Scott Morrison decide to call an election before his planned March budget.

Originally published as Staggering cost of doomsday scenario on Australian economy

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