SYDNEY - Australia’s Prime Minister Scott Morrison on Thursday (March 12) unveiled an A$17.6 billion (S$15.8 billion) stimulus package to try to protect the economy as the coronavirus threatens to plunge the country into its first recession in almost 30 years.
In a rare address to the nation, Mr Morrison said the stimulus package was designed to secure jobs and prevent businesses failing. Seeking to reassure Australians, he said the country was well-equipped to deal with the health and economic fallout.
“Once the virus has run its course, we are making sure Australia can bounce back strongly,” he said.
“I know many Australians are anxious about this and we still have a long way to go. But be assured we are taking action and we have a clear plan.”
Australia, which depends on China more than almost any other advanced economy, is facing a severe hit from the Covid-19 pandemic. A travel ban imposed by the government has put a sudden stop to arrivals from China, which is set to cost universities and the tourism sector billions of dollars.
But the outbreak is also quickly spreading within Australia, prompting the closure of offices and cancellation of events. So far, 128 cases have been confirmed.
To try to ensure that consumers keep spending and employers keep hiring, Mr Morrison yesterday announced a stimulus package that was much larger than expected.
The package includes a one-off A$750 payment to more than six million pensioners and welfare recipients from March 31.
In addition, almost 700,000 businesses with turnovers of up to A$50 million will receive payments of A$2,000 to A$25,000 to help them to pay wages or hire staff.
Businesses will also receive funding to keep apprentices in work. A further A$1 billion will be provided to hard-hit regions such as communities in well-known tourist hotspots.
The massive spending unveiled demonstrates the government’s concerns about the impact of the pandemic. It also signals the government’s determination to prevent
Australia’s world-beating era of prosperity from coming to a sudden halt. Australia has enjoyed more than 28 years of continuous growth, fuelled in recent years by China’s thirst for resources and its increasing flow of tourists and students.
But economists believe the current coronavirus outbreak, along with recent devastating bushfires, could cause a recession in Australia by mid-year.
The government has already admitted that its long-promised plan to finally deliver a surplus in this year’s budget will not be achievable due to the mounting costs of the coronavirus. Despite the stimulus announcement, Australia’s stock market still fell by more than 7 per cent.
The Treasurer, Mr Josh Frydenberg, refused to say whether further stimulus spending would be needed.
“What we couldn’t foresee was this once-in-a-century event… that’s putting the shutters up on the global economy,” he told ABC News.
Analysts praised the government’s stimulus package yesterday as a way to quickly boost confidence and encourage spending, but questioned whether it could save the economy from a recession.
“(The package) certainly signals to business that the government will support their cash-flow during a difficult period,” Ms Danielle Wood, an economist from the Grattan Institute, told ABC News.
“I think the real economic crunch here is going to come when we have to enact significant containment measures with closures of schools, childcare centres and workplaces, like we’ve seen overseas.”
The central bank, the Reserve Bank of Australia, has already cut interest rates to record lows. But it could make a further cut next month, which some analysts believe could – along with the stimulus - prevent a recession, or two consecutive quarters of contraction.
However, analysts also believe that the package announced on Thursday will need to be the first, not the last, attempt to inject cash into the ailing economy.
“I hope I’m wrong, but I doubt if Scott Morrison’s A$17.6 billion stimulus package is big enough to stop the temporary shock of the coronavirus outbreak becoming a longer-lasting blow to the economy,” wrote economics commentator Ross Gittins in The Sydney Morning Herald.
“Morrison keeps saying it’s ‘scalable’: it can be added to. Maybe he’s already intending to top it up.”