A second stimulus package is currently in consideration after Australian Prime Minister, Scott Morrison, announced a cash injection amounting to $17.6 billion on Thursday last week. Reports say the PM is discussing with Finance Minister Mathias Cormann and Treasurer Josh Fydenberg the possibility of supplementing the previous package as the COVID-19 pandemic worsens.
The first package includes a $4.76 billion allotment for the 6.5 million Australian welfare recipients, a $6.7 billion aid for small-to-medium enterprises, and a $2.4 billion for health spending.
However, social services groups and labour unions express their discontent towards the initial package for not having enough for the casual employees. The Australia Institute, a public policy think tank, said on Twitter, “[The] Coronavirus stimulus is the right size but the wrong shape.”
Nonetheless, Morrison guarantees the $17.6 billion package will earn the country $22.9 billion in the next two years. Also, he declared these economic measures would be worth under one per cent of the entire Gross Domestic Product (GDP) of Australia.
The Australia Institute said the one-off payment given to welfare beneficiaries provides the best value for taxpayer’s money. However, the research institute added that the response measures aiming at increasing investment on businesses would most likely fail. Even with the acceleration depreciation and instant asset write-off initiatives, struggling business owners might still not invest.
The organisation suggests the planned stimulus package to focus mainly on funnelling funds through community services and social security instead of on business incentives.
Stephen Koukoulas, an Australian economist, believes the current fiscal response package would not be effective at all. He stated, “While it’s a health issue, and it’s important to get everybody healthy again, we’ve also got to keep an eye on the economy.”
Koukoulas wants the government to inject funding more into the economy. He disapproves of the $10,000 to $15,000 aid, calling it chicken feed for businesses who are about to lose their living. “You’ve got to get money into people’s pockets,” he urges.
Now the country’s three top leaders are considering to enhance measures from the previous fiscal stimulus, as well as additional initiatives for supporting more businesses and families. They will announce the coronavirus package follow-up within the following week.
On Tuesday, Morrison warned that the coronavirus pandemic might have a more detrimental impact on the economy than the financial crisis of 2008. The current crisis could gravely affect the country’s $158 billion GDP as various industries such as seafood, tourism and hospitality, education, and events force millions into quarantine.
Westpac economists suggest the beneficiaries will undoubtedly save the $750 cash. They believe the pensioners will probably “save around 75 per cent of the payment.” While social security and income support groups will have a higher spending rate, but with inadequate savings, these groups are most likely to spare 60 per cent of their cash payment.
Shane Oliver, AMP Capital Investment Strategy Head and Chief Economist say the stimulus package will not stop an imminent recession as the pandemic’s effect will be too harsh over the economy.