The treasurer does not believe Australia is in as dire a situation as some leading experts predict, following warnings the country is about to suffer its biggest economic blow since the Great Depression.
The International Monetary Fund expects the Australian economy to shrink by 6.7 per cent this year, more than double the global rate, amid the coronavirus crisis.
Unemployment is tipped to rise to an average of 7.6 per cent in 2020 and 8.9 per cent in 2021.
The fund expects the economy to grow by 6.1 per cent in 2021, leaving it smaller than it was at the end of 2019.
But Treasurer Josh Frydenberg says these forecasts, while reflecting the global economic reality, don’t take into account the full extent of Australia’s support.
“As they were finalising their numbers, the JobKeeper package was just being announced and the infection rates were much higher,” he told reporters in Canberra on Wednesday.
“Since that time, we’ve bent that curve and we’re seeing a growth of less than two per cent per day and our health measures are making significant progress.
“So I’d ask you to take those factors into account because, of course, the success on the health side helps also determine the broader economic impacts that are also taking place.”
The government has so far thrown $320 billion at the crisis, or 16.4 per cent of GDP.
Treasury is working on its own forecasts of the impact to GDP.
The department released figures earlier in the week showing unemployment is tipped to reach 10 per cent by the end of June, with 1.4 million Australians out of jobs.
Shadow treasurer Jim Chalmers described the IMF numbers as incredibly confronting.
“The IMF doesn’t share the prime minister’s assumption that people will just miraculously snap back into jobs to meet his six-month deadline for support in the economy,” he told reporters.
The IMF predicts a partial rebound for the world economy in 2021, with an overall 5.8 per cent growth rate.
But the fund’s forecasts are marked by “extreme uncertainty” and the outcomes could be far worse.
Meanwhile, consumer confidence took its biggest hit in nearly half a century over the past month.
Confidence in economic conditions over the next year dropped by 31 per cent, the biggest monthly fall on record, plunging to a similar level as during the global financial crisis.
The survey results indicated one in five workers had lost their entire wage income, whether by being sacked or stood down.
“While the drop in confidence this month is severe, it could well have been worse,” Westpac chief economist Bill Evans said.
“Despite the bleak and threatening backdrop, Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad.”
Dr Chalmers said the consumer confidence numbers, while disappointing, were hardly surprising.
“Australian consumers know what international organisations know, that this diabolical health crisis will have devastating impacts on jobs and on growth in our economy here and the economies right around the world.”