Australia plans $38.b in fresh stimulus package

Bloomberg

Australia plans an additional A$66 billion ($38.2 billion) 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 savings jobs.
The plan, to be announced by Prime Minister Scott Morrison on Sunday, will provide A$25.2 billion in support to businesses and not-for-profit charities. It will also partially guarantee loans to support A$40 billion in lending to small and medium-sized firms.
The new measures dwarf the government’s initial A$17.6 billion 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.
“There is a lot of pain coming but we’re going to cushion the blow as best we can,” Morrison said in a statement. “The plan we’re rolling out is focused on building a bridge for as many of those businesses and their workers as we can to get them over this crisis. That means supporting wages for small businesses so they don’t need to let go of their staff.”
As Australia’s economy spirals toward its first recession since 1991 and its credit markets come under stress, the government and central bank have unleashed a massive shot of fiscal and monetary stimulus that Sunday’s announcement takes to A$189 billion. That’s equivalent to 9.7% of the country’s gross domestic product.
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 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.
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. Australia had 874 confirmed cases of coronavirus as of 6:30 a.m. Sydney time on Saturday, up 165 from a day earlier.
“Many of our restaurants and bars, our hotels and tourism operators, our hairdressers and beauty salons and our events companies are already feeling the brunt of the economic impact of coronavirus,” Morrison said in the statement. “This is about finding a way for them and their workers to build a bridge to the other side of this crisis.”
Morrison’s conservative government is seeking to legislate both its fiscal packages during a unique sitting week in Canberra’s Parliament House from Monday. Just 90 of the 151 lower-house lawmakers 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 coming week. When parliament will sit again after that isn’t clear. On Friday, Morrison announced that the annual budget, originally due on May 12, is now scheduled for Oct. 6.
“These are extraordinary times requiring extraordinary measures,” Treasurer Josh Frydenberg said in the statement. “Our focus remains on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly.”