How the expected $200bn budget deficit this financial year will affect the average taxpayer

Millions of Australians currently receiving JobKeeper and JobSeeker payments are eagerly awaiting today’s announcement on changes to the economic support programs.

It comes amid projections Australia is on track for a mammoth $200 billion budget deficit in 2020-21.

Deloitte Access Economic partner and economist Chris Richardson said although the deficit sounds scary, it’s “good news”.

“That is money that’s not going to stay in the pockets of government. It’s going to stay in the pockets of mums and dads, and businesses, at a time when they need it most,” he told Neil Mitchell.

“I hate to see a budget deficit if we don’t need one, but right now … amid an awful, awful time, those taxpayer dollars are precious but they’re also doing more effective work than they’ve ever done.”

With historically low interest rates, Mr Richardson said the average taxpayer won’t have to foot much of a bill for interest on debts incurred.

“For the average taxpayer, if you raised taxes to cover these extra interest costs for the debt we’re running up, you’re probably talking somewhere between $2.50 and $3 a week,” he said.

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JobKeeper payments are expected to reduce to a lower rate from September, while JobSeeker will also be tweaked.

Mr Richardson said JobSeeker is becoming increasingly more valuable than JobKeeper as the pandemic runs its course.

“As time passes, a dollar of JobKeeper is becoming less valuable and a dollar of JobSeeker, the unemployment benefit, is becoming more valuable,” he said.

“We did the smart thing early on. We threw money at businesses so they could keep people employed. Beyond a certain point, however, that doesn’t really help anybody if the business isn’t’ going to be there on the other side of this virus.”

Australian Industry Group CEO Innes Willox agreed that JobKeeper must be reduced.

“It’s just not economically sustainable to keep it at its current rate forever,” he said.

“A steady reduction makes a lot of sense.”

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