Prime minister Scott Morrison says he is confident the $17.6bn package will ‘do the job’ of propping up the economy

This article is more than 6 months old

This article is more than 6 months old

More than six million low-income earners will receive a $750 cash payment under a $17.6bn government stimulus package targeted at keeping Australians in work and avoiding the country’s first recession in almost 30 years.

Announcing the package on Thursday, the prime minister, Scott Morrison, said he was confident the targeted measures would be enough to “do the job” of propping up the economy, as the Coalition abandons a much-touted surplus for the current financial year and shifts it focus to maintaining economic growth.

The stimulus boost is equivalent to 0.9% of GDP in the March quarter, and follows initial estimates from Treasury that the effect of the coronavirus downturn in the March quarter would be 0.5%, on top of a 0.2% hit from the summer bushfire crisis.

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Three-quarters of the $17.6bn package will be directed to businesses, with a $6.7bn cashflow payment pegged to employee wages, $4bn tied to new investment incentives, $1.2bn to support apprentices, and a $1bn fund for hard-hit sectors such as tourism.

Businesses will also be allowed to defer tax obligations, with the Australian Taxation Office announcing that it will offer relief to those hit hard by the downturn on a case-by-case basis.

The household stimulus will cost $4.76bn, with payments to begin flowing from 31 March. All welfare recipients and concession card holders will receive the $750 payment, including 2.4 million pensioners and those with a commonwealth seniors card.

The government has targeted low-income earners as they are most likely to spend the stimulus payment, with Treasury understood to have estimated a 150% return to the economy for every dollar spent.

Morrison said the cash payments had a dual purpose – to benefit those who received them and to stimulate the economy.

“Frankly, it is about a cash injection into the Australian economy, which supports small businesses and supports medium businesses,” Morrison said.

“That, in turn, supports the jobs, which means people can continue to participate positively in the economy and have greater confidence going forward.”

Facing calls to use the package to also provide sick leave for casual workers, the government has announced it will waive waiting periods for the taxpayer-funded sickness allowance, but has dismissed calls to make employer-funded sick leave mandatory.

However, the sickness allowance takes five days to process, and people forced to self-quarantine will still be subject to an asset test that will make many people ineligible.

Morrison said the package had been deliberately designed to ensure that $11bn of the $17.6bn package would be “out the door” by the end of June.

“That’s when it’s needed,” Morrison said.

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“This is very front-end-loaded. We’ve done that on purpose because we anticipate that particularly over the next three months or so, that that is when we are really going to see the most significant impacts of the coronavirus,” he said.

However, he added that the government would continue to receive updates, and flagged that more spending could be unveiled in the May budget if needed.

“This response, as I’ve said, as a key principle is also scalable. The budget will be in two months’ time. We believe these measures are the measures that can do the job and we will continue to monitor events as we go forward,” Morrison said.

“If more is required, more will be done, and we’ll watch that closely like you do with any plan.”

When asked if the package would be enough to stave off a recession, the treasurer, Josh Frydenberg, said the government had been consulting “carefully” with Treasury to calibrate the package, but it was too early to know the impact of the virus on the June quarter.

“This $11bn injection of funds through to June 30 could add up to 1.5% to growth to GDP in that June quarter, but of course the unknown is how does the virus evolve from here,” Frydenberg said.

“What we have done here is put a significant amount of money into the economy to support businesses [and] to support jobs.”

The government has also outlined changes to the pension deeming rate, with an average benefit of $8.42 a fortnight, or $219 a year to age pensioners.

The lower deeming rate will be cut from 1% to 0.5% for financial investments up to $51,800 for single pensioners and $86,200 for pensioner couples.

The upper rate, which only impacts about 40% of payment recipients with deemed assets, will decrease from 3% to 2.5%.

Under the new rates, payment recipients whose income is assessed using deeming could receive up to $62 a fortnight for couples or $1,612 extra a year, and up to $50 a fortnight for singles or $1,300 a year.

The extra money will start flowing through into people’s bank accounts from 1 May.

Along with the measures for wage assistance and investment incentives, the government has also announced a $1bn coronavirus fund, which will be targeted at regions disproportionately affected by travel bans arising from the disease.

Morrison said details of how the fund would work still needed to be nutted out with the states, but it would include money to waive national park fees and to boost domestic tourism.

Labor welcomed aspects of the stimulus package, but raised concerns about the sickness allowance and the impact on casual workers.

“There are some welcome measures in this stimulus package that are worthy of our support and we will not stand in the way of them being implemented as soon as possible,” a statement from leader Anthony Albanese and shadow treasurer Jim Chalmers said.

“It remains to be seen whether these measures will be big enough or deployed quickly enough to prevent job losses, business failures or a more serious downturn.”

But the opposition said it had concerns about the lack of more substantial support for casual workers who are required to self-isolate, and said there was a risk that the sickness allowance may not be accessible, sufficient or timely enough to support casual workers.

“The government must move to implement this package quickly and properly, and be prepared to take additional steps if it becomes clear that this response has been insufficient.”

The Greens and the Australian Council of Social Service said the government’s one-off boost to welfare recipients did not go far enough, calling on the government to increase Newstart permanently.

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“This is an insult to all those people condemned to living below the poverty on Newstart and Youth Allowance,” the Greens senator Rachel Siewert said.

“Any additional payment to those living in poverty will get spent but this is simply not enough. Newstart and Youth Allowance needs to be increased immediately.”

Business groups, however, said the stimulus package would support small business, which would bear the brunt of restrictions on the movement of people and an economic downturn.

“These businesses have endured challenging trading conditions for a long time due to sluggish growth in consumer spending and difficulties in accessing finance, which makes them extremely vulnerable to further deterioration in the economy,” the Australian Chamber of Commerce and Industry’s chief executive, James Pearson, said.

Master Builders Australia also welcomed the package, saying it was a confidence boost for the building sector.

“Right now what our industry most needs is confidence and this clear signal from the government that they are determined and committed to doing whatever it takes is extremely welcome,” the chief executive of MBA, Denita Wawn, said.