The October 6 budget is going to have three priorities, 'jobs, jobs and jobs', according to Treasury secretary Steven Kennedy, but it should also provide a more nuanced set of economic stimulus packages.
Dr Kennedy appeared on the Institute of Public Administration Australia's Work with Purpose podcast alongside Commonwealth Bank chief executive Matt Comyn to discuss the economic response to the coronavirus pandemic.
It was Dr Kennedy's first interview since being appointed the head of Treasury in September last year.
Australians who have had their mortgages and business loan repayments deferred were warned by Mr Comyn that this could not continue indefinitely. Although he said there was scope for those most in need to push the resumption of repayments into 2021.
Dr Kennedy rejected the idea of a fiscal cliff which would see Australians thrown into poverty if stimulus packages were abruptly ended, saying there were multiple ways to deliver stimulus to the economy.
"The only thing to think about with fiscal policy is that stopping it or tapering it and then delivering in another way doesn't necessarily mean everything turns off," Dr Kennedy said.
"The money will continue to flow out in a smoother way than what the fiscal estimates suggest."
He said the priorities of the budget would be to boost aggregate demand, the demand for goods and services within any given economy, and policies that would secure the economy enough to generate more jobs.
Household savings, which grew to 18 per cent in the June quarter, would act as a cushion for any changes announced in the budget, Dr Kennedy said.
"We've actually put an enormous amount of money into the pockets, to the balance sheets, effectively of households and businesses," he said.
"And people are being very precautionary. Hopefully, if they're confident around the health arrangements, they begin to spend."
Dr Kennedy is no stranger to orchestrating economic policies during a crisis, as he was a central architect of the Rudd government's response to the Global Financial Crisis.
However, Dr Kennedy told the podcast the pandemic had thrown up considerably different challenges than the GFC.
"The pandemic is just a constant sort of uncertainty and unknown scenarios if you like," he said.
"It starts fast, much faster than the GFC. And then it just keeps going. So we're running up to a budget on October 6 and we're still responding."
Asked about the budgeting blunder which saw $60 billion added erroneously to the cost of JobKeeper, Dr Kennedy admitted it was a low point but also said it was partly because of Australia's excellent response to the pandemic that meant the worst case scenario did not eventuate.
I didn't feel good because obviously that's a Treasury responsibility to do that costing, advise the government for the government to make it public," he said.
"And I thought about, should I have advised a range or done it differently?"
The original JobKeeper estimate was based on a lockdown similar to those seen in the hardest hit countries of Europe where GDP fell by up to 20 per cent. Australia's GDP fell by seven per cent.
Had Australia entered into such a lockdown, Dr Kennedy said that original $130 billion estimate would have been met and even due to Victoria's recent lockdown, the JobKeeper cost sits about $100 billion.