The massive error in calculating the cost of the JobKeeper wage subsidy means the budget deficit will be smaller by nearly 2% of GDP in both the current and the coming financial year. It seems unlikely that the government will use the windfall to include casual workers in the scheme. And even if it did, it wouldn’t lift spending much. However, we still expect the budget deficit to hit 9% of GDP in 2020/21 as slumping corporate profits hit company tax revenue. And while the deficit will narrow over the coming years as the economy recovers and stimulus spending expires, it will remain much larger than it was before the pandemic.
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