The Treasurer’s “eye-watering” economic update – in which the deficit was projected to swell to $86 billion this year and $184 billion next year – raised fears the government may embrace austerity measures in order to get the budget back in black. But the Treasurer has said the government is “rejecting austerity” and will instead rely on historically low-interest rates to keep its debt burden manageable.
“We’re a government that will support the economy at a time that it needs it, but we will also be very disciplined and will grow that economy,” Mr Frydenberg told the National Press Club.
Treasurer Frydenberg also said that growing the economy would be integral to reducing debt, and expects that gross debt as a share of GDP will reduce by one and a half percentage points per year.
“We have demonstrated that we can run a balanced budget, and we will do it again,” Mr Frydenberg said. “Just as growth will be key to getting more Australians back into work, so too will it underpin our fiscal repair strategy.”
The Treasurer also tamped down on comparisons to the Rudd government’s fiscal stimulus in the wake of the GFC – which at the time was lambasted by Liberal politicians – saying the Morrison government won’t “bake in” structural changes to the budget.
“If you go back to what we saw under (Labor), they baked in structural spending,” Mr Frydenberg said. “Ninety-nine per cent of our spending is over two years – 2020 and 2021… we’re dealing with something here of a size and a scale that we haven’t seen before. Our spending is very temporary, it’s very targeted, it’s guided by the principals that took us into this crisis and that will take us out of this crisis.”
