Australia injects A$66bn more to avert recession and save jobs
Plan will provide A$25.2bn in support to businesses and not-for-profit charities
Canberra — Australia has unleashed an additional A$66bn in stimulus for the coronavirus-stricken economy, including cash payments of as much as A$100,000 to small businesses, in a second package aimed at averting recession and saving jobs.
The plan will provide A$25.2bn in support to businesses and not-for-profit charities, Prime Minister Scott Morrison said on Sunday.
It will also partially guarantee loans to support A$40bn in lending to small and medium-sized firms. Unemployment benefits will double and the worst-hit workers will be allowed to access pension savings early.
The new measures dwarf the government’s initial A$17.6bn stimulus package announced on March 12. As the crisis continues and the economic impact becomes clearer, the government expects to announce a third fiscal injection as Australia’s economy spirals towards its first recession since 1991.
“There will be more packages, there will be more support,” Morrison said at a media conference at the parliament in Canberra. “We’ll be supercharging our safety net, we’ll be supporting our most vulnerable.”
All told — including support for the banking system from Australia’s central bank — about A$189bn is being injected into the domestic economy in an unprecedented release of funds to get through the crisis. That is the equivalent of about 10% of Australia’s GDP.
Preparing the country for at least six months of hardship, Morrison said all non-essential travel in Australia should now be cancelled. He urged the country to heed social-distancing advice and warned “more draconian” restrictions are on the way.
“The next few months are going to be a difficult journey,” Morrison said. “But we all have a role to play to adapt to the changes we’re facing, to cushion the impact of what is happening and to pull together so we can bounce back when we get to the other side.”
The Reserve Bank of Australia cut interest rates to a record 0.25% on Thursday and will aim to keep three-year government bond yields at the same level. The central bank has also announced a term funding facility of at least A$90bn for the banking system to support business credit. In a complementary programme, the government is investing up to A$15bn to help smaller lenders support consumers and businesses.
The new package announced on Sunday will be available to businesses with revenue under A$50m and also some not-for-profit charities. Firms will get 100% of the tax they withhold from their employees’ salary and wages, with a minimum payment of A$20,000 and maximum support of A$100,000.
The government will guarantee 50% of loans taken out by firms affected by the outbreak, to be used for working capital.
For the next six months, those eligible to receive income support will receive an extra A$550 each fortnight, on top of their normal payment. The early release of pension savings will put as much as A$27bn back into the pockets of working Australians.
Morrison, who has described the coronavirus as a “once in a 100-year type of event”, closed the nation’s borders to non-residents on Friday and has banned indoor gatherings of more than 100 people.
Cases of coronavirus in Australia reached 1,098 at 9.30am on Sunday, up 224 from a day earlier.
Morrison’s conservative government is seeking to legislate its fiscal packages during a sitting week in Canberra’s parliament from Monday. Just 90 of the 151 lower-house legislators will convene, with support staff stripped back, in a bid to halt the spread of the virus.
The opposition Labor Party has indicated it will support the measures, meaning they should become law in the next week. When parliament will sit again after that is not clear. On Friday, Morrison announced that the annual budget, originally due on May 12, is now scheduled for October 6.