Prime Minister Scott Morrison said the government will not extend stimulus packages, saying they would dull the dynamism of the economy.
Delivering a speech to the Committee for Economic Development of Australia (CEDA), Morrison said that despite wide sweeping reforms, the government will not be able to save every business.
"Australia is expected to have the third lowest fall in GDP in 2020 of all economies surveyed by the OECD," Morrison said.
"But the hit to our economy, we must understand, is significant despite our relatively strong performance and the road ahead will be very hard. We still have a mountain to climb."
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Morrison said, compared with the mid-year update, it is expected that over $100 billion of economic activity has been lost this year.
He said that it will take around two years just to get back to the level we were at pre COVID-19.
"We need to lift our economic growth rate by more than one percentage point above trend to beat the expected pre-COVID-19 GDP by 2025, to catch back up to where we were before COVID hit," Morrison said.
"The restoration of growth is also critical to our public finances."
Morrison said the government expects it will post a deficit for the next three years as a result of both COVID-19 relief measures and the economic hit caused by lockdowns.
"There will always be a case made for spending more and for spending longer, and there are plenty who are happy to make that case. But it is not a wise or responsible course," he said.
"Such a path is dangerous and will prejudice medium and longer term capacity to deliver on core essential services...Over-extending on the fiscal supports puts those longer term and medium term supportive services at risk."
Morrison said the government plans to rebuild the economy by keeping expenditures under control, boosting revenues through pro-growth policies that lift investment and helping Australians back into jobs.
"Neither excessive austerity, nor higher taxes are the path that our government will pursue," Morrison said.
"We will pursue growth and responsible budget management that ensures that governments live within their means and guarantee the essentials Australians rely on, as ever."
Morrison said the JobKeeper and JobSeeker schemes proved to be an invaluable economic lifeline, but said some businesses will still not survive despite the support.
"Without these measures, businesses would have simply fallen over, fallen victim, never to open again," he said.
"This still may ultimately be the experience for some. But for many more, these measures will have provided the bridge that those businesses and their employees needed."
Morrison stressed that the support measures are only temporary and the government is not considering extending them beyond September.
"Left in place for too long, not only will that damage the capacity of the budget to deal with important essential services, but it will also dull the dynamism of the economy and prevent the adjustments that must necessarily take place to enable new jobs to be created and our economy to move forward," Morrison said.
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