Federal Budget 2020-21: Overview


The Budget has a strong emphasis on maintaining a sustainable fiscal strategy, promoting rebuilding and recovery of the economy from the COVID-19 recession through job creating opportunities.  

An underlying cash balance deficit of $213.7 billion is expected in 2020-21 (11 per cent of gross domestic product, GDP) and is expected to improve to a deficit of $66.9 billion in 2023-24 (3 per cent of GDP). Projecting to the medium term in 2030-31, this is expected to further improve to $49.5 billion (1.6 per cent of GDP). 

Real GDP is expected to fall 3.75 per cent this year, with economic activity estimated to grow to 4.25 per cent next year.  

Unemployment is expected to peak at 8 per cent this year, before falling to 6.5 per cent in 2021-22. When unemployment below 6 per cent is comfortably achieved, the Government will move to the second phase of its economic and fiscal strategy – to stabilise gross and net debt as a share of the economy. 

Net debt will increase to $703 billion this year (36.1 per cent of GDP) and peak at $966 billion by 2023-24 (43.8 per cent of GDP). Over the medium term, it is expected to decline to 40 per cent of GDP. Despite the increased debt to GDP ratio, it remains lower than comparable G20 advanced economies. 

Key economic parameters from the Budget are: 

 

Actual

Estimates

Projections

2018-19

2019-20

2020-21

2021-22

2022-23

2023-24

Underlying cash balance ($b)

-0.7

-85.3

-213.7

-112.0

-87.9

-66.9

Real GDP (%)

2.0

-0.2

-1.5

4.75

2.75

3.0

Unemployment rate (%)

5.2

7.0

7.25

6.5

6.0

5.5

Consumer price index (%)

1.6

-0.3

1.75

1.5

1.75

2.0

The iron ore price is assumed to decline to USD55 per tonne free-on-board in 2020-21. With uncertainty on the global economic outlook, a prudent approach to forecasting bulk commodity prices will continue. Mining exports are expected to grow by 0.5 per cent in 2020-21. Supported by robust demand for iron ore in China and gradual recovery in other key export partners as COVID-19 restrictions ease, mining exports are expected to grow 4 per cent in 2021-22.  

Highlights of key Budget revenue and expense measures relevant to the WA resources sector are included under CME’s strategic priorities of competitiveness and capability.