Industry Update has commended the government for its two stimulus announcements but called for the government to consider a faster rollout. This call is being borne out by events.
The nation has subsequently seen queues of jobless people not seen for many decades, and yesterday Westpac revealed its unemployment forecasts – more than doubling to over 11.1% by June.
We do not believe it is all doom and gloom. Australian and global shares are starting to stabilise. The crisis will create demand for Australian manufacturing as imports of anti-viral protective equipment become less reliable. And for the first time since the crisis took hold, the number of daily new cases in NSW fell yesterday - falling by 10%. This is a very postive sign.
The ability of China and South Korea to fight coronavirus and then get their economies back up and running shows that the coronavirus crisis is beatable if governments get their response right.
In Australia, however, stimulus payments to businesses are tied to the monthly and quarterly activity statement system, and even after lodgement there is a 14-day delay on the payment. This is just too slow given the circumstances.
George Washington University economist and former Australian Treasury official Dr Steven Hamilton and American Enterprise Institute expert Stan Veuger have called for Australia to implement much more aggressive stimulus.
“The size of fiscal support currently being configured in the US is up to $US2.5 trillion ($4.2 trillion), or 13% of GDP. An Australian response of similar magnitude would total $300 billion. The fiscal packages announced to date total just $88 billion,” Dr Hamilton and Dr Veuger wrote in the Australian Financial Review yesterday.
“Businesses and jobs need direct support. To that end, we have proposed a kind of businesses and jobs insurance policy.
“Any small- or medium-sized business should be able to go to their bank and secure a loan to cover any loss in revenues (net of any reduction in non-labor costs) through the crisis.
“The government could finance the loans and agree to forgive the loans if businesses maintain their worker-hours through the crisis.
We have every confidence that Australians will once again pull together to ride this crisis out. But small to medium sized businesses sure could use some extra and faster help from the government right now.