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Australia Politics March 2020

Australia: Government approves first-aid stimulus package to cushion coronavirus blow

Amid heavy stock market losses and in a bid to shield the economy from the impact of coronavirus, the government unveiled an AUD 17.6 billion stimulus package on 12 March. The package follows the Central Bank’s 0.50-basis-point cut on 3 March and aims to buttress both household spending via one-off cash payments, wage subsidies and SME’s cash flows. Moreover, it allocates funds to help the tourism sector and China-exposed exporters to withstand the economic shock. The aid package should aid consumers and companies, helping to cushion the immediate impact of the pandemic, also by bringing forward some planned spending. As the country boasts a strong record of prudential fiscal policies and low levels of public debt, its impact on fiscal risks is set to be minimal.

The package is front-loaded and stipulates that AUD 11 billion will be pumped into the economy in Q2 so as to soften the blow from Covid-19. Over six million welfare recipients and low-income earners will receive an AUD 750 one-off cash payment from March 31, totaling AUD 4.8 billion. Moreover, the package allocates AUD 1.3 billion to subsidize apprentices’ wages, as part of efforts to prevent job losses. It also strives to help the cash flow of SMEs with AUD 6.7 billion and lifts the threshold of the instant asset write-off through an additional AUD 700 million to help business investment. Lastly, it assigns AUD 1 billion to sustain the most exposed exporters and tourism operators.

Australia’s economy recorded its 28th consecutive year of expansion in 2019, although growth came in at the softest pace in the 28-year run. Although growth recovered some steam in Q4 as household spending strengthened on the back of lower taxes and interest rates, as well as the recovery in the housing market. The coronavirus global health crisis risks hitting the highly-open economy via its impact on the tourism sector, commodity exports to China and domestic demand through souring confidence and containment measures.

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