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Governments Get Tough on the Virus

The National Cabinet met on Sunday night to consider new measures to enforce social distancing. Non-essential businesses, such as pubs and clubs, will be shut down, non-essential travel will be discouraged and many public facilities will be closed. In addition, the Prime Minister, Scott Morrison, indicated that areas with a high prevalence of COVID-19 cases may be forced into social isolation.

On Sunday South Australia and Western Australia announced that they would adopt additional protective measures and close their borders to interstate travelers. They joined Tasmania and the Northern Territory who had already closed their borders.

Modelling by the Professor of Epidemiology at the University of Melbourne, Tony Blakely, shows that the approach taken by the National Cabinet has got the balance right. It will result in a peak infection rate of 125,000 at the end of May with a steady decline after that and the infection rate flattening out by the end of August. The advantage of this approach is that the governments can start easing controls from the end of May and minimize the economic costs.

On Sunday the Prime Minister and the Treasurer, Josh Frydenberg, announced a new package of measures, worth $66 billion, to keep the economy going. This increases the size of the stimulus package to $189 billion or close to 10% of GDP.

This second economic package is split into two parts: the first part will support households including those on income support, casual workers, sole traders, and retirees. The second part seeks to prop up businesses with cash, loans and regulatory protection.

According to the Treasurer, the government will temporarily widen eligibility for income support to include sole traders and casual workers earning an income and ignore the assets test. It will also give a new short term “coronavirus supplement” of $550 a fortnight to the recipients.

The new supplement will go to existing and new recipients of the jobseeker payment and other benefits and be available to sole traders and casual workers who meet the income test.

The supplement means a doubling of money received by someone on a jobseeker payment for a single person with no dependants, which is $565.70 a fortnight.

It will be paid for six months and people will receive the full $550 on top of their ordinary payment. The cost will be $14.1 billion and up to 5000 extra staff will be employed to help deliver it.

Among other measures are a second one-off $750 payment to low income households and increased access to superannuation of up to $20,000 over two years. The $750 will go to pensioners, veterans and commonwealth health card holders.

The business package includes cash payments of up to $100,000 to small and medium-sized businesses and not-for-profit enterprises, with turnovers of less than $50 million, as well as a loan guarantee scheme for SMEs. The payments will be made automatically by the tax office based on the PAYG tax paid. SME’s can negotiate unsecured loans with their banks and the Government will pick up 50% of the cost.

Among regulatory protections will be changes to bankruptcy rules. There will be a temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond. The will also be a temporary waiver of director’s liability if a company trades while insolvent.

There is a question over how effective these business support measures will be if state governments order the shutdown of non-essential businesses.

There have been 248 new cases of coronavirus infection since 6.30 a.m. Saturday which is in line with Professor Blakely’s model. However the restrictions are getting tighter. On Sunday afternoon the AFL announced that it was suspending the season. This is no doubt a consequence of the border closures, which isolated four of the teams. There are likely to be more consequences, both intended and unintended, as governments tighten restrictions.

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