Australia to Unleash A$66 Billion in Second Stimulus Package

23 Mar 2020 11:17 AM | Anonymous

Australia’s parliament convenes Monday for a special sitting to pass stimulus measures to support the economy, including an additional A$66 billion ($38.2 billion) package aimed at averting recession and saving jobs.

A reduced number of lawmakers are meeting from 10 a.m. in Canberra, with the stimulus plans the only legislation on the agenda. The opposition Labor party has signaled its support, meaning they should become law this week.

Prime Minister Scott Morrison on Sunday announced details of his government’s second package in a month, including payments of as much as A$100,000 to small businesses and charities totaling A$25.2 billion.

The government will also partially guarantee loans to support A$40 billion 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 an initial A$17.6 billion stimulus package announced on March 12. As the crisis continues and the economic impact becomes clearer, the government also expects to announce a third fiscal injection as Australia’s economy spirals toward its first recession since 1991.

“There will be more packages, there will be more support,” Morrison said at a press conference at the parliament. “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 -- some A$189 billion is being injected into the domestic economy in an unprecedented release of funds to get through the crisis. That’s the equivalent of about 10% of Australia’s gross domestic product.

Preparing the country for at least six months of hardship, Morrison said all non-essential travel in Australia should now be canceled. He urged the country to heed social-distancing advice and warned “more draconian” restrictions were 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$90 billion for the banking system to support business credit. In a complementary program, the government is investing up to A$15 billion to help smaller lenders support consumers and businesses.

The new package announced Sunday will be available to businesses with revenue under A$50 million 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 also 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$27 billion 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 as of 6.30 a.m. on March 22, up 224 from a day earlier.

After it adjourns this week, when parliament will sit again isn’t clear. On Friday, Morrison announced that the annual budget, originally due on May 12, is now scheduled for Oct. 6.

Source: Bloomberg

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