Published in The Guardian, March 12 2020
Go hard, go early, go business is the message from today’s stimulus announcement and it’s the right one for this stage of the crisis.
The government has significantly ramped up the ambition of its stimulus package from what it was considering just a week ago and will pump close to $18 billion into the economy – around 0.9 % of GDP – this financial year.
The measures to support business cashflow are welcome and should give businesses confidence that the government is willing to support them during what will be a very challenging period. The $25,000 income tax write-off for businesses with turnover of less than $50m is effectively a cash payment for all small and medium businesses with staff. The wage subsidy for apprentices should provide an incentive for businesses to keep on their younger workers, those that are otherwise most vulnerable to losing their jobs in a downturn. And the extension of the instant asset write-off – already on the cards before the coronavirus shock – will underpin investment and provide further cashflow benefits for business with turnovers up to $500m.
Household support of up to $750 goes to those getting government payments – Newstart, pensions and family tax benefits, among others. While some of this will boost demand – most Newstart recipients will spend every cent – pensioners save a lot of their income and will be less economically affected by the virus.
The government has partially addressed the problem of income risk for casual workers required to quarantine, by waiving the waiting period for the sickness allowance. Whether this is enough to cushion the income hit for these and other workers is the big question. In the (likely) event that still more stimulus is needed after virus containment measures like closing schools and workplaces are enacted, this is where the government should focus.
Photo credit – REUTERS / LOREN ELLIOTT – stock.adobe.com