So now we know the Government has parked the quest for a surplus, at least in the short term, with a $17.6 billion economic stimulus package announced today – this is less than 1% of annual GDP. It is much higher than the back-grounding at $10 billion – indicating the seriousness of our economic predicament.
But it is 2.3% of quarterly GDP and with the additional funding of around $5 billion running across the next two financial years, the total is closer to $23 billion.
The Government will pump $11 billion into the economy between now and July, which is more than the $10 billion Rudd used in the GFC stimulus, with more to come beyond. It is designed to be temporary.
The package includes one-off cash payments for welfare recipients, money to help keep apprentices in work and tax relief for small businesses.
More than 6 million welfare recipients, including pensioners, carers, veterans, families, young people and job-seekers will get a one-off cash payment of $750 from March 31. The biggest beneficiaries will be pensioners. These one-off payments will cost the Government $4.8 billion.
They are hoping these recipients will rush out and spend, so while the March quarter is a write-off they are hoping to avoid two negative quarters. But of course the passage of the virus is unknown.
Casual workers who contract the virus, or had to isolate themselves would be eligible for a Newstart welfare payment, while out of work. People will face an assets test before receiving the money, and the typical wait time to access the payment will be waived.
Nearly 700,000 small and medium businesses will receive cash payments of between $2,000 and $25,000 to help pay wages or hire extra staff at an estimated to cost $6.7 billion. The stimulus package also includes $1.3 billion in support payments to keep apprentices in their jobs amid fears the spread of the coronavirus could have a crippling effect on employment.
Medium and big businesses will be encouraged to buy equipment and other investments through an extension of the instant asset write-off. This is currently restricted to companies with turnovers of up to $50 million, for maximum investments of $30,000. But this will be significantly lifted, allowing companies with turnovers of up to $500 million to make assets write-offs of up to $150,000. Now they can claim a tax break for what they spend, though the question is whether they will, due to confidence, and available supply.
The Government yesterday had allocated $2.4 billion for a health package, including 100 pop-up coronavirus fever clinics and a new Medicare item to deliver health advice remotely.
The stimulus games begin – just remember it has to be paid for as the debt is ratcheted up…
