Australia | State budgets complementing sharp fiscal response

The withdrawal of stimulus by the state and territory governments will be a little more gradual than the federal government; there will be a sharp withdrawal of federal government support when the JobKeeper program ends in March. But state and territory budget deficits are set to remain historically large through to 2023-24, allaying some concerns over a premature tightening of policy.

What you will learn:

• Australia’s states and territories have signalled a substantial loosening of fiscal policy, complementing the aggressive response from the federal government to the pandemic. 
• The federal government’s fiscal response to the COVID-
  19 pandemic has been swift and will result in another sharp increase in the budget deficit in FY21. The increase in the deficit is primarily due to greater expenditure (+15% in FY20 and forecast to increase 22% in FY21).
• The states and territories combined budget deficit expanded to 1.9% of GDP in FY20 and will widen further to 4.4% in FY21.