The state budget is $273 million in deficit which is a significant improvement than the $716.4 million deficit forecast in May.
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Premier Peter Gutwein released the second economic and fiscal update from state Treasury on Friday.
It showed an improvement of $443 million in terms of the state's budget deficit, compared to the first update released in May.
The budget's original 2020-21 forward estimate was expected to be a surplus of $85.1 million.
In May, this was set to be a $1 billion deficit.
The revised figure in the new report is a $937 million budget deficit.
Net debt is expected to reach $1.58 billion in 2020-21.
Premier Peter Gutwein said the numbers were an improvement on those forecast in the first economic and fiscal update in May.
"Our focus hasn't been on the money, our focus has been on saving lives," he said.
"We have been impacted both in terms of our revenue, but in terms of our support packages.
"We will need to carry increased debt over the next 12 months." He said there had also been an improvement on the jobs front.
Mr Gutwein said as of the end of June, 12,700 jobs had been lost.
"So since the peak in May, we've picked up around 13,400 jobs that were lost," he said.
Mr Gutwein cautioned that the distorting impact of the JobKeeper and JobSeeker payments would need to be considered when the true nature of job losses was revealed in the future.
Mr Gutwein said it was difficult to look too far into the future in terms of revenue forecasts, particularly GST receipts which the state is heavily reliant upon.
"This pandemic turns on a five-cent piece," he said.
"It depends on how quickly Victorians come out of this period. Victoria is worth 25 per cent of the national economy.
"I expect there will be a significant impact on the GST pool moving forward."
Labor's finance spokesman David O'Byrne said the fact the budget was not as bad as predicted in May was nothing to celebrate.
"Today's report shows the budget is now $273.1 million in deficit and we also remain on a collision course with over $1.5 billion in net debt," he said.
"We were in trouble going into COVID and it's just got worse."
He said there was a reason no other state had produced this type of document.
"The environment is so unpredictable and it's hard to produce a set of reliable figures," he said.
Tasmanian Chamber of Commerce and Industry chief executive Michael Bailey said the government's more favourable economic forecast meant it could do more to help the business sector drive recovery.
"We believe that the government should look to extend the payroll tax holiday for at least the 2020-21 financial year," Mr Bailey said.
"We also believe the government should look to reduce power prices to help stimulate the economy and provide real relief for the many Tasmanians that are doing it tough this winter."
