What’s in the Coronavirus Stimulus?
The Government is likely to announce a multibillion stimulus package this week to deal with the economic impact of the bushfires and the coronavirus which is estimated by the Treasury to cost 0.7% of GDP this quarter.
The package has been put together after discussions between the International Monetary Fund and the Treasury. On Tuesday the Attorney General, Christian Porter, will meet unions and employers “to enlist their support and cooperation” to minimise impacts to Australia’s workforce and ensure supply chains are not impeded.
“It’s vitally important that we are all working towards the same goal of ensuring that, as much as possible, key industry sectors like food and pharmaceutical manufacturing, mining, health and transport are able to operate at maximum capacity,” Porter said.
On ABC ‘Insiders’ on Sunday morning, Labor’s health spokesman Chris Bowen said the stimulus package should have been available sooner.
“Yes, it should have. And the important point here is the coronavirus will have a significant impact,” he told David Speers on Sunday. “Nobody is denying that. We’re not denying that. But the problems in the economy didn’t start with the coronavirus and they won’t disappear when the coronavirus is dealt with.
“There has been ongoing weakness in the economy. Economic growth is slowing.”
However, the Treasury secretary, Stephen Kennedy, told Senate estimates on Friday that Treasury hadn’t modelled the recession yet which makes it difficult to determine the extent of the stimulus needed.
Chris Bowen also argued that the Reserve Bank had reached the limit of its ability to stimulate the economy.
“The economy has been weakening,” he said. “Now the government does need to respond. One of the things that they could do is adopt the policy we took with the election with the Australian investment guarantee – a … 20% upfront for all businesses and investments big or small.
“That’s a good step. One that they dismissed arrogantly at the time and said wasn’t necessary. I do think that they’ll have to adopt something like that. And there are other measures that need to be put in place as well.”
It is likely that the Government will have some form of short term stimulus for business but it will not be structural reform as proposed by Labor. What the Government wants to avoid is the introduction of measures that continue long after the need for stimulus is over: the school halls program went on for two years after it was needed.
There are indications that there will be subsidies for employers of apprentices so they can be kept in work during the downturn. Local councils are also likely to receive funding to carry out small infrastructure projects which will inject money into suburban and regional economies. State Governments have been asked to bring forward projects that assist with bushfire recovery. NSW transport minister Andrew Constance has suggested widening the Newell and Princes Highways which make a considerable difference to some damaged areas.
There is one more sitting week of Parliament before the Government brings down the budget, so it will have to get its skates on to get any legislation through. Labor has given a conditional indication that it will co-operate but it wants an opportunity to suggest changes before the legislation is brought into the house.
The challenge for the Government is to get it right.