Scott Morrison has today unveiled the government’s second economic rescue package to deal with the escalating crisis.
The packaging, totalling $66.1 billion over the remainder of this financial year and next, is designed to pump money to small and medium businesses and protect those who lose their jobs. It consists of the following measures:
- Newstart recipients will receive “a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight” for the next six months. Eligibility for Newstart, under its various new names, will also be expanded to make access easier.
- All welfare recipients except Newstart recipients will receive a further $750 payment on top of the previous $750 handout, in July.
- The Newstart measure is expected to cost $14.1 billion over the forward estimates period while the welfare recipient handouts will cost another $4 billion.
- Individuals in financial stress will be able to apply online to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21, tax free. Cost: $1.2 billion
- Businesses with turnover of below $50 million will be able to access funding based on the PAYG payments they withhold of up to $50,000 this financial year, and $50,000 next financial year (there will also be a floor payment of $20,000 for all businesses). The payments will be made in late April and July. Cost: $32 billion (including $7 billion from the first package).
- The government will also guarantee 50% of new loans to small and medium enterprises of up to $250,000, making it easier for small and struggling businesses to access funding made available by the Reserve Bank’s massive $90 billion injection of funding for business investment last Thursday. The government will guarantee up to $20 billion.
- Bankruptcy law thresholds will also be increased to make it temporarily more difficult for creditors to initiate action against firms.
Comment
Despite efforts by the government, and some journalists, to hype a “$189 billion injection” (including the RBA’s $90 billion intervention on Thursday), today’s package looks too small to make a major difference in the face of an economic catastrophe.
Coupled with the first stimulus package, the government is providing around $58 billion in direct stimulus or support for businesses and households, or around 2.5% of GDP. But the overall package is better understood in terms of its timing: around $28 billion of that is intended to reach recipients by June 30, so it’s more accurate to say the emergency stage of the package is around 5.6% of GDP — although businesses will have to wait over a month to access much of that money, and a month at this point might just be too long.
The remainder of government assistance — including last Thursday’s $15 billion injection of funding for small lenders — is in the form of additional business investment funding, or investment incentives such as depreciation allowances, that brings the total cost of all measure up to nearly $100 billion, but may not help small business facing closure.
And 5.6% of GDP would have been a great package mid-way through last week. Unfortunately for the government, events, and this virus, are moving so fast that even waiting 24 hours can dramatically change the scale of what we’re facing. If the government’s plan is to keep rolling out major packages every week, that’s a defensible plan to respond to this constant change.
But it will miss something that the Rudd-Swan government was able to deploy effectively — a “wow factor” that come from big numbers, numbers big enough to get the attention of worried Australians.
Given that, a package worth $100 billion should have been rolled out today.
On the positive side, Newstart recipients will get a long-awaited increase, although it’s not permanent (except, good luck to the government letting the expanded payment expire if unemployment is still high in six months).
They’ll likely spend most of that money, unlike the rest of us, who on average save 60% or more of stimulus payments, according to figures obtained by Labor’s Andrew Leigh. Expanding eligibility for Newstart is also a positive given that Australians are losing their jobs right now.
The superannuation changes will be controversial. Super funds — retail, industry, corporate — may have to liquidate assets to meet demands for cash if people decide to take advantage of the changed rules, and now is not the time for super funds to be dumping assets.
Still, it’s easy to criticise from the sidelines. Governing in this catastrophe is tough, and requires rapid decision making. Stimulus stage 3 will likely be coming soon enough, and it may be bigger again.
Apologies for having only come down in the last shower, but can someone please explain how shedloads of pretend money, magicked out of Treasury, will stimulate an economy that is 70+% dependent on services – which by definition require people doing things to/for/with, not to put too fine a point on it, other people?
This used to be called, in more honest times, taking in each others’ laundry.
“some journalists”? Like Speers?
Last night’s “ABC Special” – as soon as someone is critical of his Limited News Party (as was Goldie/O’Neill) : he’s straight in, to pull the up, to remind them of what Scotty From Marketing’s “said” – wishful as that might be, and without question from Speers.
As for that “help for small business to retain staff” (thanks Westacott – like Strong and Carnell – the only side of business she can see is the positive?) – how long before we hear about small businesses that are rendered unviable at this time, “letting go” staff, to hire family members, to qualify for this hand-out?
Honestly, I know that the Slomo used to use the call “Those that give it a go, get a go”, will probably show that there is a way to take that government money and shut up shop.
As for the Newstart, aka Job Seeker,or commonly known as the dole, the extra money doesn’t kick in until April 29.
That is a month away and I suspect that the homeless rate will rise in that time.
For politicians safely on their parliamentary stipend plus entitlements, I suppose they are immune to the crisis, even though they are directly responsible for failing to close borders, check essential supplies and get some more when they didn’t have enough.
At the moment to business is likely to be too much to soon.
When the self isolation rules are eased, businesses will need money to restock and pay staff after they have both been on short rations. How you get this money into the economy without breaking down self isolation is the key.
The government and the landlords (Westfield et al) should be supporting business with rent relief, and shared pain. Businesses that don’t survive wont pay rent, and will be slow to be replaced.
China is already coming out of lockdown, hopefully they will dig into strategic stockpiles to get business up and running. Our government needs to encourage them, and ensure efficient resupply when transport links are reopened. We need to avoid ships anchored off Australian ports ready to move resources, but their crews are in lockdown in the Philippines
Finally the government should read Crikey to see what truck loads of UN aimed money have done for the US economy over last 5 or 10 years. Not much useful.
At the moment to business is likely to be too much to soon.
When the self isolation rules are eased, businesses will need money to restock and pay staff after they have both been on short rations. How you get this money into the economy without breaking down self isolation is the key.
The government and the landlords (Westfield et al) should be supporting business with rent relief, and shared pain. Businesses that don’t survive wont pay rent, and will be slow to be replaced.
China is already coming out of lockdown, hopefully they will dig into strategic stockpiles to get business up and running. Our government needs to encourage them, and ensure efficient resupply when transport links are reopened. We need to avoid ships anchored off Australian ports ready to move resources, but their crews are in lockdown in the Philippines
Finally the government should read Crikey to see what truck loads of UN aimed money have done for the US economy over last 5 or 10 years. Not much useful.
Was a very partisan political package aimed at liberal heartland.
Yes Speers was poor last night. ABC has almost no capacity anymore to provide any insight. The legacy of a generation of gotcha journalism practice