Get ready to be paying off debt for 30 years
Children born today will likely be 30 before Australia pays down its coronavirus pandemic-induced debt, as the national budget bottom line suffers the biggest hit since World War II.
Josh Frydenberg will reveal on Thursday that the federal government's $289bn emergency response to COVID-19 and a huge drop in tax revenue has resulted in the largest annual budget deficit since 1945.
With economists expecting consecutive budgets of $100bn and $200bn in the red, The Daily Telegraph understands Australia's gross debt has ballooned to $850bn.
Thursday's update will show tax revenue is expected to plummet by $25bn over the 2019-20 and current financial years.
Adding to the pain is the six-week lockdown of greater Melbourne, estimated to reduce national GDP growth by $3.3bn in the September quarter alone.
Business investment is forecast to have dropped 6 per cent in 2019-20, but will get much worse this financial year, doubling to 12.5 per cent.
Positively, the government's emergency spending has prevented about 700,000 job losses.
The Treasurer said the COVID-19 pandemic was a "once-in-a-century shock" and credited the government's balanced budget in 2018-19 as giving Australia the "financial fire power" to respond to the virus.
"Australia has outperformed nearly every other country in both health and economic outcomes through this crisis," he said.
Mr Frydenberg said the $164bn in direct support measures and a large decline in tax receipts were a "necessary" hit to "cushion the blow" of the pandemic.
Australia's gross debt stands at $719bn as of July 17 while the latest financial data from May showed net debt at $464bn and the annual budget deficit running at $68bn.
EY Oceania chief economist Jo Masters told The Daily Telegraph she agreed with modelling suggesting it could be 25 to 30 years before Australia paid down a worst-case $1 trillion gross debt.
"There's not a gold equation that tells you when you start to pay it back and how quickly," she said.
"But you wouldn't even want to start thinking about repaying debt, or getting the budget back to surplus until the economy has stabilised and that's several years away."
SGC Economics and Planning partner Terry Rawnsley said mapping a path to pay down the debt was like a "choose your own adventure" novel.
"Debt was at this large level coming out of the Second World War, but much of that was actually rubbed out pretty quickly as the government threw open the doors for immigration and had a post-war boom," he said.
"That's a wildcard scenario today, but in other scenarios we grind on and persist with elevated debt, maybe we just get used to having gross national debt at 30 to 40 per cent of GDP."
Mr Rawnsley said the next few years of deficits are going to be "big" and "persistent".
"We will be in a deep valley for a couple of years at least," he said.
Originally published as Get ready to be paying off debt for 30 years