This article analyzes the direct current and small-signal parameters of MgZnO/ZnO (MZO) HEMT for microwave application. Further, the impact of the MgO spacer layer on the microwave performance parameters such as transconductance (gm), cut-off frequency (fT), maximum oscillation frequency (fmax) and Johnson's figures of merit (J-FOM) of MZO HEMT has been analyzed. MZO HEMT with MgO spacer results in the enhanced values of two-dimensional electron gas (2DEG) density of 7.2×1013 cm-2 and gm of 91 mS/mm. The values of fT and fmax exhibit 3-fold enhancement to 5.57 GHz and to 7.8 GHz, respectively, and J-FOM is increased by 2.93 times with the introduction of MgO spacer layer in HEMT structure. Moreover, the impact of MgO spacer is studied on the off-state breakdown mechanism of MZO HEMT. The off-state breakdown voltage (Vbr) of MZO HEMT is ~25 V higher than that for MZO HEMT with an MgO layer. Therefore, there is a trade-off between the microwave performance and the device off-state breakdown voltage. This work is significant for the development of large-area and cost-effective ZnO-based HEMTs for microwave applications.