The Morrison Government was meant to unveil Australia's long-awaited surplus this year. Instead Australia has recorded the biggest deficit in decades.
Australian workers face decades of debt with the nation hit with an $850 billion debt bomb in borrowings to fight the Covid-19 crisis.
It's a debt and deficit challenge that the Morrison Government has warned voters will take more than a decade to repay, but is necessary to protect jobs and the economy.
Treasurer Josh Frydenberg has revealed the stunning cost of the Covid-19 crisis today in an economic update that shows Australia's budget deficit will hit the $184 billion mark this financial year, in the biggest blowout since World War II.
Just months ago, he had hoped to hand down the first budget surplus in Australia in years.
As pandemic lockdowns deliver a once-in-a-century hit to tax revenues, he has also confirmed the 2019-20 budget deficit – the difference between the government's revenue and outlays in that year is $85.8 billion.
Those figures reflect the $289 billion that the Morrison government has dropped on stimulus measures including direct payments to people on welfare, increases to JobSeeker and the JobKeeper wage subsidy.
But it's the debt levels that have blown out as the Australian Prime Minister and Treasurer were forced to borrow more money to pay for those measures and were hit by lower tax revenues.
Australian Treasurer Josh Frydenberg said that Australia continues to have a low debt to GDP ratio compared with other countries.
Deloitte Access Economics' Chris Richardson has previously predicted the 2020-21 budget deficit could blowout to $200 billion.
As Australia recorded its highest ever daily tally of Covid-19 cases yesterday, the Morrison government revealed tax revenues have taken a $95.6 billion hit as a result of Covid-19.
Frydenberg pointed to big-spending measures to save jobs including JobKeeper, which have saved 700,000 jobs and lowered the peak of unemployment by up to 5 percentage points.
After the Covid-19 crisis first hit earlier this year the Morrison government delayed the May budget to battle the virus and prepare the stimulus packages to support the economy.
Ahead of the announcement Frydenberg said Australians should prepare themselves for a shock as the true impact of the coronavirus pandemic is revealed.
"You will see eye watering numbers around debt and deficit," he said.
"Numbers that Australians have never, ever seen before.
"That's the harsh reality of this pandemic. The coronavirus has required the government to spend unprecedented amounts of money to support people in need."
The Morrison government announced this week it would extend the JobKeeper programme until March 2021 at a cost of $16 billion.
"Every dollar we spend is a borrowed dollar, and that's why it will take some time to pay back the debt," Frydenberg said.
The budget will now be handed down on October 6, but today's figures outlined the challenge in a budget update.
The Morrison government was expected to warn of significant uncertainty around the global and domestic economic outlook and that controlling the spread of the virus remained a significant challenge.
Even where infection rates appear to have been controlled, the Treasurer will warn that further outbreaks, such as those experienced in Victoria, could set back recovery at any time.
The figures will confirm record falls in key indicators of business investment, household consumption, the labour market and trade activity over the months since March.
As a result of the extraordinary uncertainty, the July Economic and Fiscal Update will contain economic and fiscal estimates for 2019-20 and 2020-21 only instead of the usual four-year forward estimates.
The new figures will reveal that the reintroduction of restrictions in Victoria in response to the latest virus outbreak will reduce national real GDP growth by around $3.3 billion.
"The Covid-19 pandemic is a once-in-a-century shock that is placing immense pressure on health systems and economies all around the world,'' Frydenberg said.
"Australia has outperformed nearly every other country in both health and economic outcomes through this crisis. The progress the health front will shape the speed and trajectory for the recovery in Australia."
"Our announced measures, together with large declines in taxation receipts, has seen a hit to the bottom line, but this has been necessary in order to cushions the blow for millions of Australians, and to keep businesses in business and keep Australians in jobs."