Scott Morrison will hand out $750 in cash to millions of families that qualify for family tax benefits, aged pensioners, and the unemployed in a desperate bid to stop a coronavirus-induced recession.
The stunning multibillion-dollar economic stimulus package announced on Thursday is twice the size the Morrison government hinted at just days ago, with the majority of the cash assistance to small businesses, seniors and families to be delivered within weeks.
It will wipe out the forecast “back in black” $5 billion surplus, a decision the Prime Minister predicted Australians would understand.
“This is very front-end-loaded. We’ve done that on purpose,” he said.
“The cash payments have two purposes. And they’re both important.
“Of course, those who receive them – that is obviously a benefit to them. But more importantly, frankly, it is about a cash injection into the Australian economy, which supports small businesses and supports medium businesses.
“This plan is about keeping a business in business, particularly small and medium-sized businesses, and this plan is about ensuring the Australian economy bounces back stronger on the other side of this and, with that, the budget bounces back with it.”
The new measures to attempt to recession-proof the Australian economy also include a wage subsidy for apprentices and tax breaks for small businesses.
Small businesses will also secure more generous instant asset write-off changes, which will apply from Thursday until July 1, to encourage immediate investment.
Small business to secure up to $25,000
Eligible employers with a turnover of less than $50 million will also secure up to $25,000 in tax-free payments to help cashflow – at a cost to the budget of $6.7 billion over the forward estimates.
Any small business that withholds tax from the Australian Taxation Office on employees’ salary and wages will receive a payment equal to 50 per cent of the amount withheld, up to a maximum of $25,000.
Warning there are predictions the coronavirus will wipe 0.5 percentage points from Australia’s GDP in the March quarter, the Prime Minister will argue action is needed but insist the nation is “well placed” to manage the economic shock from the coronavirus.
“We’ve balanced the budget and managed our economy, so we can now use this to protect the health, wellbeing and livelihoods of Australians,” Mr Morrison said.
“Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly.”
Wage subsidies for apprentices
The measures will include wage subsidies of $7000 a quarter for each apprentice to retain existing trainees or to re-employ those who lose their jobs because of any coronavirus downturn.
Employers will secure a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage from January 1-September 30, 2020.
Eligible businesses will be those with 20 full-time employees or fewer. Larger employees can also benefit if they re-engage an eligible out-of-trade apprentice or trainee.
The apprentice or trainee must have already been in training with a small business on March 1.
Employers can register for the $1.3 billion subsidy plan from April 2.
Treasurer Josh Frydenberg said the measures would be temporary and would not repeat the “mistakes” of the Rudd government during the global financial crisis.
“In our response, we have been very careful not to repeat the mistakes of previous stimulus programs and not undermine the structural integrity of the budget,” Mr Frydenberg said.
“By acting decisively, this package will put Australia in the strongest possible position to deal with the economic challenges we face and to make sure our economy bounces back even stronger.”
The Prime Minister and Treasurer have previously flagged they are reconsidering the deeming rate, which determines access to the pension and part-pension, in light of record-low interest rates.
Social Services Minister Anne Ruston said about 900,000 Australians will also see an increase to their fortnightly social security payments under a separate measure to reduce deeming rates.
“The government is absolutely committed to ensuring the deeming rate is fair and is a reasonable reflection of the state of the market,” Senator Ruston said.
“The lower deeming rate will be cut from 1.0 per cent to 0.5 per cent for financial investments up to $51,800 for single pensioners and $86,200 for pensioner couples.
“The upper rate, which only impacts about 40 per cent of payment recipients with deemed assets, will decrease from 3.0 per cent to 2.5 per cent.