Prime Minister Scott Morrison has warned Australians will need to tighten their belts, as the nation recovers from the coronavirus pandemic.
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In an address to the Committee for Economic Development of Australia's State of the Nation forum on Monday, Mr Morrison said the nation had avoided the worst of the COVID-19 fallout.
Australia's death rate of four people per million of our population was "a fraction" of other developed economies around the world, with some recording rates of more than 100 times that, Mr Morrison said.
The nation was expected to have the third lowest fall in GDP in 2020 of all economies in the OECD.
However, the financial hit had still been significant. An estimated $100 billion of economic activity had been lost this year alone.
Australia was facing a record deficit, not just because of the coronavirus stimulus packages but falling government revenue too.
The country needed to grow its GDP by 1 per cent per year to catch up to where it was pre-COVID by 2025.
"There is a mountain yet to climb," Mr Morrison said.
This would require a recalibration of Australia's fiscal strategy.
"This does not mean stepping back from our commitment to essential services and addressing the further needs in aged and disability care," he said.
"We remain committed to those essential services and supports within the Australian community. Such expenditure, we carefully planned and controlled, will support growth and it will boost confidence. But we must be extremely cautious about our expenditure especially as we navigate our way back from the record fiscal supports now in place."
Facing calls from Labor to make the boost to the JobSeeker payment permanent and extend JobKeeper to more workers, Mr Morrison said overextending on spending measures was not a "wise or responsible course".
"Such a path is dangerous and will prejudice medium and long-term capacity to deliver on core essential services like health, hospitals, schools, education, the pharmaceutical benefits scheme, our social security support," Mr Morrison said.
"Overextending on the fiscal supports puts those longer term and medium term supportive services at risk. Our budget will be balanced again by keeping expenditures under control while boosting revenues through pro-growth policies that lift investment and get Australians back into jobs, just like we did last time.
"Neither excessive austerity nor higher taxes are the path that our government will pursue."
