Almost one in 10 Australians will be unemployed by Christmas as the coronavirus decimates the economy.
The country has plunged more than $850 billion into debt and will be $184.5 billion in deficit this financial year.
The official jobless rate will peak at 9.25 per cent in the December quarter, leaving another 240,000 people out of work.
“These harsh numbers reflect the harsh reality we face,” Treasurer Josh Frydenberg told reporters in Canberra.
Mr Frydenberg outlined the devastating impact of the coronavirus pandemic in a special budget update on Thursday.
“We can see the mountain ahead and Australia begins the climb,” he said.
The budget plunged $85.8 billion into deficit in 2019/20, which will more than double this financial year, in the worst figures since World War II.
The deficit has been driven by enormous government spending on people sacked or stood down in the crisis.
More than $164 billion has been spent on direct financial supports including the JobKeeper and JobSeeker payments.
Thursday’s figures also exposed a huge hit to government revenues.
Tax receipts dropped by $31.7 billion in 2019/20 and will decline $63.9 billion this financial year.
Business investment is forecast to fall by six per cent in 2019/20 and 12.5 per cent this financial year.
Mining investment is one of the few bright spots with China’s growing demand for coal and iron ore crucial to the recovery.
Gross domestic product, which measures the total value of goods and services produced in Australia, has sunk deep into negative territory.
Deloitte Access Economics partner Chris Richardson said the health crisis was always bound to pound the budget.
But he said the eye-watering debt and deficits had shielded families and businesses from financial ruin.
“There’s a risk today that we talk about how awful it is rather than remembering this is exactly what you want the budget to do in a crisis,” Mr Richardson said.
“If you’re going to protect Australians you have to do it through the budget.”
Shadow treasurer Jim Chalmers has long argued the economy was floundering before the pandemic struck.
“With unemployment rising and forecast to hit 9.25 per cent, Australians need and deserve a plan to tackle the jobs crisis in this recession and create well-paid, secure jobs into the future,” he said.
“After months of delays, we still didn’t get that plan from the Morrison government.”
Labor argues because every dollar spent is being borrowed, the government must ensure the money is directly linked to supporting Australians out of work.
Treasury says the supports put in place have saved 700,000 jobs and lowered the forecast peak unemployment rate by five percentage points.
Mr Richardson believes it will take three to four years for the economy to bounce back, but the task will be easier than most people think.
“The fastest periods of growth are always after a downturn in the economy,” he said.
“The rule of thumb is the bigger the downturn, the bigger the bounce back.”