The Victorian Government has provided an update on how it expects economic activity in the state will be affected by the six-week COVID-19 lockdowns.

Modelling released this morning shows it now expects gross state product to slump by more than five per cent in 2020.

The impact on topline government revenues is expected to top more than $8 billion through to June 2021, due to cumulative falls in property tax, payroll tax, and GST compared to pre-pandemic budget estimates.

At the same time, the government has incurred an additional $3.4bn in direct costs to support companies and households, including $771m in grants for more than 77,000 businesses and another $504m in payroll tax refunds.

Other big spending initiatives include $7bn for the Building Works package of infrastructure projects and $2bn to help ensure the state’s health system is equipped to deal with additional COVID-19 outbreaks.

The budget details come as the state recorded another 403 positive tests over the past 24 hours bringing the total number of cases in the state to more than 7,000.

Wartime spending

Meanwhile, the federal government has provided its first economic update since the pandemic began, with revised budget numbers that illustrate the scale of support measures to combat the pandemic.

Treasurer Josh Frydenberg flagged a budget deficit of $85.8bn for the 2019-20 financial year — a figure which is expected to blow out to $184bn in FY21.

It marks the biggest federal deficit since World War II and is about four times as big as the $54bn deficit incurred by the Rudd government to buffer the economy through the 2008 financial crisis.

Back in February, buoyant commodity prices had put the government on track to post an FY20 surplus of around $5bn.

While the economic impact is material and the scale of government support is historic, stock investors still like the outlook for equity valuations, with the ASX200 pushing higher above the 6,000 mark — a level its held above for the last seven days.