Josh Frydenberg forecast some hefty budget deficits in his economic update last week, and chances are they are only going to get bigger as a result of tackling the COVID-19 crisis.
In his much-awaited economic and fiscal update, the treasurer said the deficit for the 2019/20 financial year was expected to be $85.8 billion, rising to $184.5 billion in 2020/21.
In his mid-year budget review last December, Mr Frydenberg had predicted small surpluses in both financial years.
AMP Capital chief economist Shane Oliver expects the government will be forced to provide at least a further $20 billion in stimulus between now and the delayed May budget on October 6, and he also thinks revenue will recover more slowly than the government anticipates.
That would see the 2020/21 deficit ballooning to $220 billion.
"Supporting the economy through this tough period is absolutely the right thing to do," Dr Oliver said in a note to clients.
He said his concern is that between 300,000 and 500,000 jobs will be permanently lost.
"That is obviously a big problem going forward," he told the ABC. "You're thinking about areas of the economy which have been subject to cost-cutting. One of the things that coronavirus has done is that it has accelerated automation."
Treasury confirmed the economy is suffering its first recession in nearly 30 years and expects the economy with contract by 0.25 per cent in 2019/20 and by a further 2.5 per cent in the following financial year.
Deloitte Access Economics economist Nicki Hutley concedes forecasting in the current climate is like building a "house on shifting sands" given the uncertainty surrounding the outlook.
"That said, we do have to say that the (government's) numbers are probably rosy," she told the ABC News channel.
"I think that they are overly optimistic, particularly on the international border."
The assumptions are based on international borders opening on January 1, that would include a quarantine period.
They also presume Victoria will start opening up again after the six-week lockdown of Melbourne and the Mitchell Shire.
Victorian Premier Daniel Andrews isn't about to guarantee that restrictions will be lifted after six weeks.
"The halfway mark is next Wednesday night at midnight ... and that seems a long way off to me, because a day like this is like a month," he told reporters in Melbourne after announcing a further five deaths and 357 new infections.
"I can't predict what tomorrow's numbers will be like, or where we will be in a week, let alone towards the middle of next month."
Mr Frydenberg is expected to be quizzed further on the outlook when he appears on the ABC's Insiders program on Sunday.
Residents in metropolitan Melbourne are subject to stay-at-home orders and can only leave home for essential work, study, exercise or care responsibilities. It is also mandatory to wear masks in public.
People in Australia must stay at least 1.5 metres away from others. Check your state’s restrictions on gathering limits.
If you are experiencing cold or flu symptoms, stay home and arrange a test by calling your doctor or contact the Coronavirus Health Information Hotline on 1800 020 080.
