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Government launches stimulus 2.0
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The federal government has announced a second major economic rescue package worth A$66 billion that increases support for small businesses.
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The latest package of measures comes on top of an initial A$17.6 billion in measures and more than A$100 billion in banking measures. The total package of A$189 billion is almost 10 per cent of GDP, with the government saying there will be more to come as the Covid-19 crisis unfolds.
As well as a series of welfare payment increases, the latest round of measures increases a previous wage subsidy to small business that will rises from a A$25,000 cash refund to a maximum payment of A$100,000.
The payment is available to businesses with a turnover less than A$50 million and also for not-for-profit charities. The amount is to be paid automatically by the Australian Taxation Office based on a company’s business activity statements, linking it directly to maintaining employees.
There is also a loan guarantee scheme that will support lending to small- and medium-sized enterprises and is available to businesses with a turnover of less than A$50 million. Under the scheme, the Commonwealth government will guarantee 50 per cent of an eligible loan to businesses disrupted by coronavirus.
The government has also announced packages aimed at industries that are being particularly hard hit by the crisis, including aviation, which will receive A$715 million in relief. Under that package, the government will waive fees including aviation fuel excise and Airservices charges on domestic airline operations. The measures will be backdated to 1 February.
Prime Minister Scott Morrison said the first two packages were focused on those people and businesses “who are going to feel the first blows”, but there will be more packages and support over the next six months.
The federal government has also pushed back its budget from May to Tuesday 6 October. The prime minister said it was no time to be putting together a budget, given the degree of uncertainty.
“The idea that you can actually put together any sort of forecast around the economy at this time is simply not sensible,” Mr Morrison said.
States and territories will also delay their budgets.
Prior to the stimulus announcement, Australian banks said any small businesses affected by Covid-19 could defer its loan repayments for six months. Australian Banking Association chief executive Anna Bligh said banks were keen to address what they saw as the most urgent need, which is helping small businesses to keep operating.
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Prime Minister Scott Morrison has announced a further economic stimulus package, and warned Australians that it could take six months or more to get on top of the Covid-19 outbreak. |
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States release their own stimulus measures
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States and territories have released their own economic packages in order to help businesses stay afloat, with various combinations of tax relief, grants and loans.
New South Wales, which has the lion’s share of cases and fatalities from the virus, announced a A$2.3 billion coronavirus stimulus package. Premier Gladys Berejiklian said A$700 million will go towards funding more health services, with the remaining A$1.6 billion aimed at economic stimulus measures.
That includes A$450 million allocated to waive payroll tax for businesses with payrolls of up to A$10 million for three months. Meanwhile, more than A$750 million will be spent on infrastructure projects across the state in an effort to boost economic activity.
Victoria’s three-stage assistance package is worth about A$1.7 billion, with Premier Daniel Andrews saying the first stage will consist of A$550 million that would go to 24,000 small- and medium-sized enterprises with a payroll of less than A$3 million as a payroll tax refund.
Queensland is also offering payroll tax relief for eligible businesses as part of its relief package. Employers that pay less than A$6.5 million in Australian taxable wages and have been directly or indirectly affected by the coronavirus are potentially eligible. The state government is also offering low-interest loans to help eligible businesses retain employees.
Western Australia’s A$607 million stimulus package includes more than A$400 million aimed at lowering fees and charges for households. Meanwhile, small- to medium-sized businesses with a payroll between A$1 million and A$4 million will receive a one-off grant of A$17,500. The government is also offering payroll tax relief.
South Australia’s A$350 million package is centred around infrastructure, with the government bringing forward a number of projects as well as announcing new projects around road maintenance, housing, tourism and health.
Australian Capital Territory Chief Minster Andrew Barr said the territory’s A$137 million package is likely to be the first of several. It includes a number of measures aimed at businesses, including deferring payroll tax for 12 months and rebates on commercial electricity bills.
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We are clearly living in extraordinary and challenging times.
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— RBA Governor Dr Philip Lowe
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Parliament resumes, with reduced numbers
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Federal parliament has resumed for its final session before the May budget, with the government and opposition agreeing to a reduced schedule.
Parliament is only dealing with the passing of the government’s two economic stimulus packages, although the opposition has requested question time go ahead as usual. However, there will be a reduced number of MPs and senators present, in an effort to reduce contact and the need for travel.
Meanwhile, the National Security Committee of cabinet, which includes the prime minister as well as the defence, foreign and home affairs ministers, is meeting on a more regular basis to not only cope with the increased workload, but to ensure the continuity of ‘business-as-usual’ government decision-making.
While the government’s bandwidth is largely occupied by Covid-19, the NSC’s increased tempo, as well as more frequent meetings of the wider federal cabinet, is aimed at clearing space for other decision-making that still needs to take place, such as in defence, home affairs and foreign affairs.
Federal cabinet is also increasing its tempo, meeting on Tuesday nights and Friday mornings.
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States introduce lockdowns, close borders
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As federal and state governments work to keep the economy going, many jurisdictions are starting to implement their own lockdowns.
As Prime Minister Scott Morrison announced the government’s latest economic stimulus package, the country’s two most populous states – New South Wales and Victoria – announced the lockdown of non-essential services. Given it is surrounded by NSW, the Australian Capital Territory (ACT) followed suit and announced the shut-down of non-essential services.
South Australia and Western Australia then announced their borders would close from tomorrow (Tuesday). Tasmania had already announced that anyone arriving in the island state would need to self-isolate for 14 days, effectively shutting its border.
The announcements followed a spike in Covid-19 cases and widespread public disregard for social distancing measures. The various lockdowns are so far targeted at the services sector, such as bars and cinemas, with essential services such as fuel stations and supermarkets remaining unaffected. Indications are that defence industry is also excluded from the non-essential list.
Mr Morrison said the measures in place were likely to last for six months at least.
“There is no short-term solution to this. We have to steel ourselves for the next six months and work together to slow the spread in order to save lives,” he told parliament.
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Bank cuts rates, aims to save small firms
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Australia’s central bank has cut interest rates to an historic low of 0.25 per cent and announced a raft of measures aimed at supporting businesses in an effort to cushion the economic impact of the coronavirus pandemic.
Reserve Bank of Australia Governor Philip Lowe said the bank would keep interest rates at 0.25 per cent for the foreseeable future, with rates not rising until it is confident unemployment is moving towards 4.5 per cent and inflation is between 2 and 3 per cent. Unemployment is currently at 5.3 per cent and expected to climb substantially as the crisis unfolds, with economists at Westpac tipping it to surge to 7 per cent. Inflation, meanwhile, is at 1.8 per cent.
In addition to a prolonged period of historically low interest rates, the RBA announced a series of measures aimed at lowering banks’ costs and ensuring they are willing and able to lend to businesses, particularly smaller firms.
Among those is a A$90 billion funding facility designed to encourage banks to lend to businesses, particularly small- and medium-sized enterprises. In conjunction with the RBA’s move, the federal government has provided the Australian Office of Financial Management with A$15 billion to extend to smaller banks and non-bank lenders, which will allow them to continue lending to small businesses.
The RBA has also begun a significant round of government bond purchases from banks and other investors, which will not only lower the yield on those assets – again lowering the cost of funds – but will also inject significant cash into the economy since the bank is not purchasing the bonds directly from the government.
Speaking after the announcement, Dr Lowe outlined the scale of the task ahead and the unpredictability of the situation.
“I am not able to provide you with an updated set of economic forecasts. The situation is just too fluid. But we are expecting a major hit to economic activity and incomes in Australia that will last for a number of months. We are also expecting significant job losses,” he said.
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SAS shooting referred to police
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Defence Minister Linda Reynolds has made a formal referral to the Federal Police regarding “alleged serious criminal conduct” of an Australian special forces soldier in Afghanistan.
It follows a report on the Australian Broadcasting Corporation that showed a member of Australia’s Special Air Service shooting dead an apparently unarmed Afghan man in May 2012. The soldier – named as “Soldier C” in the report – was subsequently identified and suspended from duty.
Senator Reynolds, who served in the Australian Army Reserve as a brigadier, said she was “deeply disturbed” by what was aired in the report.
The Australian Defence Force (ADF) had earlier conducted an investigation into the killing following complaints from tribal leaders. It determined the shooting was lawful because the man posed a direct threat.
However, after the airing of the report, the Department of Defence said it was “extremely concerned by the matters raised in the Four Corners program”.
The ADF is currently waiting on the findings of an ongoing Inspector-General of the Australian Defence Force’s inquiry into the conduct of Australian Special Operations in Afghanistan. That report will go to the Chief of the Defence Force, who will decide what action should be taken.
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Hospitals preparing to delay surgeries
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Hospitals are preparing to cancel all but the most urgent surgeries ahead of an expected surge in Covid-19 patients putting the health system under extreme stress.
The chairman of the Royal Australian College of Surgeons NSW, Ken Loi, said operations for trauma patients will go ahead, as would open heart surgery, but if the system comes under intense pressure, elective surgeries would be delayed if not defined as “Category 1”.
These are procedures for medical conditions that could deteriorate quickly and become an emergency and should be performed within 30 days. Category 2 surgeries should be performed within 90 days, while Category 3 surgeries can be deferred for longer.
Pushing back Category 2 and 3 surgeries would take out the majority of orthopaedic work, other than trauma.
Queensland’s chief medical officer said “normal” work is continuing in the state’s hospitals, but there is a decrease in “some of the very elective work”.
Meanwhile, the head of Australia’s largest private health insurer says reform of the sector will have to take a back seat to dealing with the coronavirus pandemic.
Medibank chief executive Craig Drummond said the pandemic had altered the company’s priorities for the year, with regulatory reform dropping in urgency.
Instead, the private health sector will be focussing on dealing with the increasing number of Covid-19 cases, with patients likely to be transferred from public hospitals into the private system, which will lead to a spike in claims from members. He added that a rise in patients moving to private hospitals would also push back elective surgeries.
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Study backs Inland Rail benefits
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A new report suggests regional communities will benefit from a A$13.3 billion boost generated by the construction of Inland Rail.
The EY study says there is potential for complementary industry investment alongside the rail line to generate billions of dollars in added value for regional communities over the first 50 years of its operation.
Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development, Michael McCormack, said the report offered proof of Inland Rail’s long-term contribution to regional Australia.
“Inland Rail is going to draw industry to regional Australia where the enhanced freight rail network will connect companies and consumers both domestically and internationally,” he said.
The report builds on the A$16 billion in gross domestic product outlined in the Inland Rail Business Case.
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