Treasurer Tim Pallas revealed the startling figure in an economic update on Thursday.

Coronavirus, which is gripping Victoria with a continuing second wave, has been blamed for the dire financial situation.

"The coronavirus pandemic has really prompted a worldwide recession," Mr Pallas told reporters.

"That is, of course, as a result of both social distancing arrangements that impact upon business, the closure of national borders ... closure of state borders, as well as dwindling demand for Victoria's key export sectors."

As a result, Victoria's tax revenue has dived to be $2.5 billion lower in 2019/20 and around $6 billion lower in 2020/21 than previous forecasts.

"The reduced revenue and the government's unprecedented investment in support measures means that the Victorian budget will now likely return an operating deficit of $7.5 billion in 2019/20," Mr Pallas said.

Before the pandemic, Victoria had been running surpluses and was predicted to continue doing so.

Then, devastating bushfires ripped through parts of the state and the coronavirus pandemic took hold, both needing state government financial intervention.

As the pandemic has continued, so has the need for government support, which is so far tallying at $9 billion.

That includes $3.4 billion in support to businesses and households and almost $2 billion in health measures.

"The economic devastation caused by coronavirus is simply eye-watering and for many individuals it will be both traumatic and devastating," Mr Pallas said.

"The revised modelling shows gross state product is forecast to fall by 5.2 per cent in this calendar year. It predicts unemployment to peak at 9 per cent in the September quarter."

That means unemployment could peak with 200,000 job losses, but it's hoped the jobs rate recovers to 7.5 per cent by June 2021.

The modelling is based on the assumption that the second lockdown covering five million Victorians in metropolitan Melbourne and the Mitchell Shire lasts only the six weeks originally planned.

The federal government is equally pinning its hopes on Victoria's lockdown ending on time.

"Treasury has based their assumptions on Victoria being in lockdown for six weeks... after which restrictions are progressively eased," National Treasurer Josh Frydenberg told reporters during a budget update on Thursday.

Coronavirus is also behind the federal budget falling $85.8 billion into deficit in 2019/20, which will more than double this financial year - the worst figures since World War II.

While coronavirus has wreaked havoc on budgets across the country, the state opposition say the books were already in disrepair.

"While other states continue with their economic recovery, the budget mess and recession that Labor got Victoria into before COVID-19 will now last longer due to Labor's mismanagement of hotel quarantine," shadow treasurer Louise Staley said.

Australian Associated Press