Scott Morrison will on Tuesday warn the negative economic impacts of the coronavirus outbreak are potentially greater for Australia than the shocks endured during the global financial crisis (GFC), as the cabinet prepares to sign off on a multibillion-dollar stimulus package targeting households, including with cash to boost consumption, and business.

With financial markets on Monday recording the worst local plunge since the GFC – and with respected market analysts now predicting Australia could tip into a technical recession – Morrison will use a speech on Tuesday to argue China “cushioned the blow” for Australia during the financial crisis, which began in the north Atlantic, and reverberated across the globe.

But in the case of coronavirus, China sits at the epicentre of the outbreak, and is more interconnected with the global economy, which changes the balance of risks, both for Australia and the world.

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With both Westpac and Bloomberg Economics now forecasting that Australia will go into recession this year, the prime minister will on Tuesday launch a direct appeal to businesses to “hold onto your people”, including casual employees, if workers succumb to coronavirus infections. Morrison will declare the country now faces a “national interest” moment.

In making the case for a substantial stimulus package to support the economy, Morrison will flag seven principles. He will signal the package will be delivered through existing payment systems and delivery mechanisms, and the measures will be both scaleable and temporary to enable a fiscal exit strategy.

The prime minister will say the focus of the multipronged package will be on boosting domestic consumption, reducing cashflow pressures for vulnerable businesses, and supporting new investments to lift productivity. Morrison will note a public health crisis “has quickly moved to weaken demand, disrupt supply chains and crunch cashflows, especially for small and medium-sized businesses and especially in those sectors and locations hardest hit”.

While the finance minister, Mathias Cormann, last week declared households should not expect Kevin Rudd-style cash payments, on Monday the treasurer, Josh Frydenberg, softened the ground for some form of handout, confirming the government would look to support people through the tax and transfer system to ensure “the support gets out there as fast as possible”.

With unions rallying to boost compensation for casual workers forced to take unpaid time off work to help contain the spread of the illness, Morrison will make a direct appeal to businesses “to support your workers, by keeping them employed”.

“Hold onto your people, you will need them on the other side,” the prime minister will say. “Wherever possible, support them – whether full-time, part-time, or casual – including with paid leave if they need to take time off due to the virus.”

Morrison will also urge big business to support small business, including with cashflow. “We need you to support your small business suppliers by paying them promptly. Pay your suppliers not just in time, but ahead of time, especially now”.

“We confront today a new, complex, hydra-headed and rapidly evolving challenge – the coronavirus, Covid-19,” Morrison will say. “While not immune, so far we have been able to get ahead of this. To stay ahead, we must work together and continue to take decisive and timely action.

“This is one of those national interest moments.”

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The government has signalled that a new business investment allowance, a financial boost for pensioners through changes to deeming rates, and immediate support for small and medium-sized businesses will form part of the stimulus package, which is expected to be unveiled before Morrison meets the premiers this Friday at the Council of Australian Governments.

While the Coalition trumpeted the budget returning to surplus during last year’s federal election, when the budget was actually in balance, Morrison will make it clear on Tuesday the government will bankroll the stimulus package, thought to be in the range of $5bn to $10bn, while maintaining social spending on health, disability support, infrastructure and defence, rather than look to claw back expenditure.

While Labor argues the economy was already weak before the twin hits of the summer bushfire crisis and the coronavirus outbreak, Morrison will say on Tuesday both the government and the Reserve Bank were confident at the end of 2019 that a “turning point had been reached”.

But that outlook changed radically in the opening months of 2020. “Within a month the bushfire crisis intensified and Covid-19 struck. Occurring simultaneously, they have dramatically impacted Australia’s economy and finances.”

Morrison will characterise the current volatility on the financial markets as a combination of uncertainty and repricing risk. But he will say the markets continue to operate effectively “and the Reserve Bank governor has noted the RBA will ensure the Australian financial system has sufficient liquidity”.

He will argue risk aversion is contagious. “There is the potential for heightened risk aversion to flow over into reduced business and consumer spending, reducing demand across our economy.

“These effects would be greater if coronavirus were to have a significant impact on the health of our workforce – something that we are working very hard to prevent.”

The government has been flagging that the imminent stimulus package could be supplemented by another round of measures in the May budget. “The range of possible economic outcomes will depend on the spread, severity and duration of the health crisis and its interaction with demand-side and supply-side effects,” Morrison will say on Tuesday.

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The prime minister will argue if the stimulus package is well designed, a longer term structural hit to the budget can be avoided.

On Monday, the shadow treasurer, Jim Chalmers, encouraged the Morrison government to move quickly and substantively with the stimulus package. “We need to make sure that whatever the government announces is not too little too late.

“We need to make sure that whatever they announce is big enough and fast enough to make a genuine difference in a floundering economy,” Chalmers said.

The shadow treasurer also advocated support for workers whose incomes will be disrupted by the coronavirus, and for businesses. “We need the government to focus on those most affected by these challenges – whether it be workers without paid sick leave, whether it be businesses in the affected sectors having trouble with cashflow”.

The industrial relations minister, Christian Porter, will meet on Tuesday with unions and employer groups.