The International Monetary Fund has sounded the alarm as governments around the world scramble to ward off virus-induced recessions.
Australia’s sharemarket followed the lead of an overnight global crash after US President Donald Trump predicted up to 240,000 American lives could be lost to coronavirus.
The ASX closed 2 per cent lower off the back of major slides in the banking sector, hours after the IMF implored governments to enact ‘wartime measures’ to rescue their economies.
In a blog post, the fund warned the world is now in the first of two “war” phases as workers contract the virus and strict social distancing measures weaken activity.
The IMF said economic policy should meet three objectives to reduce pain in the “post-war recovery” phase: Guarantee the viability of essential sectors like healthcare; support households afflicted by the crisis; and prevent widespread business closures.
“If policies ensure that workers do not lose their jobs, renters and home owners are not evicted, companies avoid bankruptcy, and business and trade networks are preserved, the recovery will occur sooner and more smoothly,” the IMF wrote.
Following three major announcements from the Australian government, The New Daily examines how Australia’s response compares with the rest of the world’s.
Australia responds to the economic challenges
The Morrison government has so far committed more than $193 billion in fiscal stimulus measures to keep a lid on unemployment and boost the cash flow of affected businesses.
The latest package – a $130 billion wage subsidy program – was well received by business groups and economists despite leaving many casual workers and international students in the lurch.
Westpac chief economist Bill Evans described the JobKeeper payment as a “game changer” and subsequently revised down his peak unemployment forecast from 17 per cent to 9 per cent.
Under the scheme, businesses that have lost revenue as a result of the coronavirus will receive $1500 a fortnight for every worker they keep employed during the crisis.
They must then pass this on to workers.
Those not eligible for the new JobKeeper payment can instead apply for JobSeeker, which was effectively doubled with the introduction of a fortnightly coronavirus supplement.
And about 6.5 million Australians – including pensioners, Jobseeker recipients, carers and those who claim Austudy – will receive two payments of $750.
However, those who receive the coronavirus supplement will not receive the second payment.
As for SMEs, Treasury offered a helping hand in the form of a $20 billion loan scheme, which enables struggling borrowers to access up to $250,000 for a fixed term of three years.
And on the health front, Health Minister Greg Hunt unveiled a $2.4 billion package to support primary care (including $100 million for telehealth consultations), aged care, hospitals and medical inventory.
“We are ensuring people can access essential care in a way that reduces their potential exposure to infection,” he said.
United States seals ‘historic’ $2.2 trillion package
After weeks of partisan squabbling in Congress, President Trump last week signed the biggest rescue package in US history.
Its cornerstone measure is a direct payment scheme reminiscent of Kevin Rudd’s GFC cash handouts, which helped keep Australia out of recession.
American adults who earn up to $US75,000 ($122,754) will receive $1200 in direct relief, and the amount incrementally decreases by $5 for every $100 increase in salary, up to a limit of $US99,000.
Workers who earn above that amount will not receive a payment.
The monumental expenditure also includes a contentious $500 billion corporate bailout fund to rescue big businesses – including embattled airlines – and other businesses deemed “critical to the maintenance of national security”.
Small businesses received support in the form of a $350 million forgivable loan program designed to prevent mass employee layoffs, as well as refundable payroll tax credit for businesses that employee fewer than 500 staff.
In a sign of the massive challenge ahead for the US economy, a record 3.3 million Americans filed for the government’s beefed-up unemployment benefits package last week.
The Trump administration’s package also offers workers furloughed or laid off during the crisis an additional $US600 per week and encompasses previously ineligible groups such as gig workers and freelancers.
UK paved way for Australian wage subsidies
Scott Morrison’s wage subsidies announcement came two weeks after the United Kingdom’s ground-breaking decision to subsidise 80 per cent of workers’ wages – up to a value of £2500 ($5086) a month.
Chancellor Rishi Sunak said the “unprecedented” three-month scheme would ensure workers remain in the workforce even if their employer cannot afford to pay them.
Workers also received welcome relief after Prime Minister Boris Johnson declared a three-month moratorium on private rental evictions and three-month mortgage “holidays”.
Small business owners and self-employed workers have also been looked after.
The British government established a £330 billion ($671.3 billion) loan package – which amounts to 15 per cent of UK GDP – to assist businesses fearing bankruptcy amid unpredictable economic headwinds.
And the country’s near-four million self-employed workers will also be entitled to claim up to £2500 ($5086) a month in government grants in a £9 billion ($18.3 billion) bailout scheme announced late last week.
Among the benefits for small to medium-sized businesses include business interruption loans ranging from £1.2 million ($2.4 million) to £5 million ($10.2 million) and £25,000 cheques ($50,837) (per property) for retail, leisure and hospitality businesses.
As for other countries, the Centre for Future Work has compiled an extensive list of international initiatives.