The Australian government has revealed a range of stimulus policies over the past two weeks, in response to the growing threat presented to the economy by COVID-19. These stimulus measures, which are likely to be expanded in the near future, are aimed at assisting both consumers and businesses.
As at March 23rd, the announced stimulus measures are expected to cost $189 billion, or close to 10% of Australian GDP. The Reserve Bank of Australia has also announced more than $100 billion in emergency banking measures, to ensure the stability of the financial system. These measures come at a time when the economy is facing severe negative headwinds from quarantine measures, supply chain disruptions, and falling consumer sentiment.
Stimulus for consumers
The government has announced a six-month coronavirus supplement for the Jobseeker Payment unemployment benefit scheme. Those who are unable to find employment will receive an additional $550 per fortnight for the next six months. This represents an effective doubling of unemployment benefits. Sole traders and the self-employed will also be able to access additional unemployment benefits. If sole traders and casual workers are currently making less than $1075 a fortnight, they will be eligible to receive the full supplement.
Close to 6.5 million lower-income Australians will receive a one-off $750 payment on March 31st, which is intended to stimulate domestic demand.
An additional $750 payment will also be provided on the 13thof July to social security and veteran support recipients, and concession cardholders, and those who receive the age pension, a carers allowance or family tax benefit and Commonwealth senior card holders. The payment will be made automatically from July 13th to about 5 million Australians.
Individuals who are unemployed, lost their employment after January 2020, or have had their working hours or income cut by more than 20%, will be able to access up to $10,000 of their superannuation savings.
Stimulus for businesses
Small and medium businesses (SMEs) with a turnover under $50 million will be eligible to receive up to $100,000, minimum of $20,000 through the Boosting Cash Flow for Employers scheme, which is intended to provide greater ability for SMEs to retain employees. The government estimates this measure will assist 690,000 businesses, which employ close to 7.8 million people.
The Government will guarantee half the value of $40 billion in loans to SMEs, reducing risks for lenders. This will enable SMEs to borrow up to $250,000 for a period of three years at a lower interest rate.
To assist SMEs to retain apprentices, the Government is also providing a 50% wage subsidy to SMEs for apprentices up to September 2020. The government expects this policy will support up to 70,000 SMEs, employing close to 117,000 apprentices.
To encourage businesses to spend, the government has increased the instant asset write-off threshold from $30,000 to $150,000. Allowable depreciation tax deductions will also be accelerated until June 2021.
To reduce insolvency risk, the government has also temporarily increased the minimum threshold for creditors issuing a statutory demand on a company from $2,000 to $20,000.
Sector specific support
In addition to the economy wide measures outlined above, the government has also announced targeted stimulus measures for at-risk areas of the economy. Future policy announcements are likely to expand this targeted stimulus.
The Air and Space Transport subdivision, including the Domestic Airlines industryand the International Airlines industry, will receive a $715 million support pa This package includes the waiving of various fees such as fuel excise, aviation security charges, and charges from the government-owned air traffic controller, Airservices.
A $1 billion fund for regional assistance has also been announced, to support operators in tourism, agriculture, and education. However, the details of this fund have yet to finalized and will be negotiated with state governments.
Financial system support
While the Government has focused on fiscal policy to support the economy, the Reserve Bank of Australia (RBA) has also implemented a range of monetary policies to assist financial markets.
The cash rate has been lowered to 0.25%, effectively the lower bound for interest rates. RBA Governor Phillip Lowe has stressed that negative interest rate policy is highly unlikely to occur in Australia.
A quantitative easing program has begun, where the RBA is now purchasing government debt securities in order to control bond yields and free up credit elsewhere in the financial system.
The RBA has announced larger and more long-term repurchase agreement facilities for financial institutions, also known as repo operations. This is intended to provide liquidity to financial markets.
This article will be updated as new announcements are made by the Government.
