Australia will gamble on an unprecedented $189 billion stimulus package to protect the nation from a looming recession.
The scheme will including cash payments of up to $100,000 for small businesses, unsecured loans, wage subsidies and welfare payments for the unemployed.
Prime Minister Scott Morrison will announce on Sunday the massive shot in the arm for the economy aimed at helping employers retain staff with an injection of cash ten times the value of his original $17 billion stimulus package.
It includes a second stimulus injection of $66 billion on top of the first round, plus the measures announced by the Reserve Bank this week, bringing the total package to $189 billion.
The latest cash splash is likely to keep the budget in deficit for years to come but is necessary to protect the nation from being plunged into a prolonged recession.
It will include a wage subsidy to save small business jobs, plus a guarantee on loans to small businesses intended to help them weather the storm of expected shutdowns.
Some businesses will be eligible for a cash payment of up to $100,000.
The Prime Minister is also foreshadowing a third phase to the stimulus package that will be announced over the next six months. He conceded, however, that not all small businesses will survive the coronavirus.
“We want to help businesses keep going as best they can or to pause instead of falling apart,” he said.
“We want to ensure that when this crisis has passed Australia can bounce back.
“There is a lot of pain coming but we’re going to cushion the blow as best we can.
“We’re already seeing the devastating economic impact coronavirus is having for Australia’s local businesses. Unfortunately, it is going to get worse before it gets better – but it will get better.”
Treasurer Josh Frydenberg said Australia should be reassured the government was doing whatever it could to cushion the economic impact.
“These are extraordinary times requiring extraordinary measures, but Australians can be reassured that their government is working day and night to protect their health, wellbeing and livelihoods,” he said.
Yes the whole ‘flatten the curve’ approach, while better than ‘it’s just a flu’, still implies many die and the economy and many smaller businesses get buried too…
…Remembering that small business employs 44% of Australia’s workforce should underline where we need to focus.
— Simon Stahn (@SimonStahn) March 21, 2020
The tax-free cash payment of up to $100,000 will be worth 100 per cent of the tax those small businesses are withholding from their employee’s salary and wages.
But to be eligible, employers must be running a small or medium business with a turnover under $50 million. It will also be available to eligible not-for-profit charities. That measure is worth $25.2 billion.
“Australia’s small and medium businesses are the engine room of our economy. When they hurt, we all hurt,” the Prime Minister said.
“The plan we’re rolling out is focused on building a bridge for as many of those businesses and their workers as we can to get them over this crisis.
“That means supporting wages for small businesses so they don’t need to let go of their staff, and ensuring that during the crisis small businesses know we have their backs on their bank loans.
“Many of our restaurants and bars, our hotels and tourism operators, our hairdressers and beauty salons and our events companies are already feeling the brunt of the economic impact of coronavirus. This is about finding a way for them and their workers to build a bridge to the other side of this crisis.
“The next few months are going to be a difficult journey but we all have a role to play to adapt to the changes we’re facing, to cushion the impact of what is happening, and to pull together so we can bounce back when we get to the other side.
“This is all about getting through the next six months or longer as the virus takes its course. Our support is all about building an economic bridge to get us to the other side so, together, we get through this.”
The new package includes the first $17.6bn tranche of the stimulus package and the $105 billion worth of measures the Reserve Bank of Australia has announced to help banks give small business owners a six months pause on some loans.
The stimulus is twice the size of the comparative stimulus packages in Canada and Hong Kong (both 4.5 per cent of GDP) and South Korea (4 per cent of GDP).
The Morrison Government will also announce the Coronavirus SME Guarantee Scheme will be able to be accessed by eligible banks and non-bank lenders
The Commonwealth will guarantee 50 per cent through the participating banks of an eligible loan to small and medium enterprise customers that have been impacted by the coronavirus.
The scheme will assist new or existing customers of banks and non-bank lenders.
The maximum loan value will be $250,000 for a term up to three years but it will not apply to re-financing of existing customers.