Commonwealth Bank chief economist Michael Blythe said the stimulus would help Australia avoid a recession.

Skate through June quarter

"I think the front-end loading and targeting will help us skate through the June quarter," Mr Blythe said.

"But it does need consumers and businesses to step up to the plate and use the incentives on offer. What happens to sentiment from here will be critical," he said.

Citi's Josh Williamson is also now expecting a recession will be avoided but says the government has to drive home messages of confidence.

"Assuming 50 per cent of the additional grants and payments are saved, the government should avoid a technical recession on its watch...[but] merely providing payments to businesses and households is not enough,"

Mr Williamson said.

"Recipients need to have the confidence to spend their payments on goods and services, rather than add to precautionary savings or debt repayment."

NAB chief economist Alan Oster said this stimulus would mean a technical recession was likely to be avoided.


"Not all of this will be spent straight away but it does remove the downside risk we expected.

"This stimulus is smaller than that of the financial crisis but it is very targeted. I think it will be enough. It is more than we expected."

However UBS economist George Tharenou said regardless of a fiscval stimulus Australia would now enter a recession.

"Recession is now our base case, despite an almost 1 per cent of GDP stimulus," Mr Tharaneou said.

"For Australia a 'technical recession' is now likely, with two negative quarters of GDP in 1H-20, ending a ~world record 29-year run."

In 2008 and 2009 the Rudd government made payments in two rounds: in December 2008 and in March-April 2009. The cash payments of about $900 each went out to more than 13 million Australians.

ANZ analysis showed that the handouts in 2008 led to the highest month-on-month growth in retail expenditure since 2001, up 4.1 percent in December 2008. The second handout during that crisis led to the second-strongest month on month growth rate since 2001, up 2.6 per cent in March 2009.

ANZ said those handouts also prompted a sharp increase in quarterly household consumption growth.


Industry Super chief economist Stephen Anthony said the action was the best possible in this situation.

"This goes about as far as the Treasurer and Prime Minister can go to avoid a reversal of the economy in financial year 2020. I think what they have done is eminently sensible — a stitch in time saves nine.

"The focus on small and medium-sized enterprises and disadvantaged is exactly the right place to boost the economy."

Prime Minister Scott Morrison said this stimulus would work differently to that of the financial crisis because of the precise way cash injections to business would be administered.

Overall he is confident that based on past experience it will make its way through the economy and avoid a recession.

"It's going through to those people, which we know from past experience are most likely to churn that into the economy quite quickly," Mr Morrison said.

"It's not for us to tell those Australians how to spend their money but what we do know from experience is that they will spend that money and that money will encourage economic activity, particularly in the June quarter," Prime Minister Scott Morrison said.