Virus-hit Australia hopes $15.6b stimulus will ward off recession

Australian Prime Minister Scott Morrison has unveiled an A$17.6 billion (S$15.6 billion) stimulus package to try and 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 on Thursday that the package was designed to secure jobs and prevent businesses from failing. "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," he said.

Investors responded to the plan yesterday, sending the local share market soaring 4.4 per cent.

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 that has put a sudden stop to arrivals from China 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 and ensure that consumers keep spending and employers keep hiring, the stimulus package announced by Mr Morrison is much larger than expected.

It includes a one-off A$750 payment to more than six million pensioners and welfare recipients.

In addition, almost 700,000 businesses with turnover of up to A$50 million will receive cash payments of between A$2,000 and A$25,000 to help them 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 hot spots.

The massive spending signals the government's determination to prevent Australia's world-beating era of prosperity from coming to a sudden halt. The country has enjoyed more than 28 years of continuous growth.

But economists believe the coronavirus outbreak, along with recent devastating bush fires, could cause a recession by mid-year.

While analysts praised the government's stimulus package as a way to quickly boost confidence and encourage spending, they 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 at 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," she added.

However, analysts also believe that the package will need to be the first, not the last, attempt to inject cash into the ailing economy.

"I doubt (the) package is big enough to stop the temporary shock of the outbreak becoming a longer-lasting blow to the economy," economics commentator Ross Gittins wrote in The Sydney Morning Herald.

"Morrison keeps saying it can be added to. Maybe he's already intending to top it up."