Mar 30 2020
The Australian government has revealed a range of stimulus policies over the past three 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 $214 billion, or close to 11% 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.
Assistance 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.
- 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.
- Individuals who are unemployed, lost their employment after January 2020, or have had their working hours cut by more than 20%, will be able to access up to $10,000 of their superannuation savings.
- Residential landlords will be banned from evicting tenants under financial stress caused by the coronavirus economic downturn for the next six months.
- To assist businesses to retain employees, the Government will provide a fortnightly wage of up to $1,500 per worker while businesses are on standby in coming months. Businesses that receive this subsidy will be under a legal obligation to retain the employee. To be eligible, companies with turnovers of less than $1 billion must have lost at least 30 per cent of their revenue. The payment is available to workers still employed or laid off after March 1st.
Assistance for businesses
- Small and medium businesses (SMEs) will be eligible to receive up to $100,000 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.
- Commercial landlords will be banned from evicting tenants under financial stress caused by the coronavirus economic downturn for the next six months.
- Foreign investment restrictions have been tightened by the Government, with all investment offers by foreign entities now subject to review by the Foreign Investment Review Board and the Treasurer.
- Small businesses with loans of up to $10 million will be eligible for a six-month repayment deferral. Commercial landlords with loans of up to $10 million will be eligible for six months' repayment relief. To be eligible they must agree they will not evict any tenant who is in arrears because of COVID-19.
- Businesses with annual Victorian taxable wages up to $3 million will have their payroll tax for the 2019-20 financial year waived.
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 industry and the International Airlines industry, will receive a $715 million support package. 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.