Business payments to be accompanied by assistance for households, with total package expected to be worth $15bn

This article is more than 6 months old

This article is more than 6 months old

Australian businesses will receive an assistance package worth at least $8.7bn in response to the coronavirus outbreak, as the government seeks to urgently stimulate the economy and stave off a looming recession.

Cash payments for businesses, wage subsidies for apprentices and a massive expansion of the instant asset write-off aimed at encouraging the sale of cars, utes, tools and industrial equipment will form the centrepiece of the business boost that will kick in as early as Friday.

The business package, to be announced on Thursday, will also be accompanied by assistance for households, with direct cash payments for households to form part of the overall economic stimulus plan, expected to be worth more than $15bn.

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A major focus of the business package, which aims to “keep business in business and Australians in jobs”, will be a tax-free cashflow boost for employers worth up to $25,000.

The payment will be open to businesses with a turnover of less than $50m and is designed to help pay wages or for investment to protect against a downturn in activity.

Under the scheme, an eligible business that withholds tax for the Australian Tax Office on employees’ salary and wages will receive a payment equal to 50% of the amount withheld, up to a maximum payment of $25,000. The minimum payment will be $2,000.

The $6.7bn measure is estimated to benefit about 690,000 businesses employing around 7.8 million people, and will be made available for businesses who lodge business activity statements for the March and June quarters.

Treasury has already warned that Australia faces a 0.7% contraction in growth in the March quarter as a result of the twin hit from the bushfires and the virus outbreak, with the government facing the risk of a technical recession of two consecutive quarters of negative growth.

in response to fears a recession could put hundreds of thousands of people out of work, the government will make apprentices a focus of the business package. A new subsidy will be made available to employers in a bid to keep about 120,000 apprentices in a job.

The scheme, costing $1.3bn over the next six months, will offer small businesses with fewer than 20 full-time workers up to $7,000 in wage assistance for each apprentice per quarter, and will apply for both the retention of existing apprentices and the re-employment of someone who loses their position as a result of the coronavirus downturn.

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The wage subsidy will amount to 50% of the apprentice’s or trainee’s wage until the end of September, and will be offered to a new employer if a small business can’t afford to hold on to staff.

A third key element of the package includes an expansion of the instant asset write-off aimed at “supercharging” the sale of new tools, cars and kitchen equipment.

Under the proposed changes, the threshold for the instant asset will be lifted from $30,000 to $150,000, and expanded to businesses with an annual turnover up to $500m, increased from $50m.

The measure is expected to be worth $700m over the forward estimates and will help 3.5m businesses.

The prime minister, Scott Morrison, said the stimulus package, which has been ratcheted up from “modest” to “substantial” over the past week, was focused on ensuring continuity for workers and businesses so the country “can bounce back strongly”.

“Getting young Australians into work and keeping them there is vital and our action will protect around 120,000 apprentice tradies and trainees,” Morrison said.

“The economy needs temporary help right now to bounce back better so the livelihoods of all Australians are protected.”

The treasurer, Josh Frydenberg, said the government was approaching the economic challenge posed by the coronavirus from a position of strength, pointing to forecasts from the International Monetary Fund and the OECD that predicted Australia would grow faster than comparable countries including Britain, Canada, Japan and France.

“Our plan keeps businesses in business, supports jobs and provides a stimulus to households,” Frydenberg said.

“The government has worked hard over the last six and a half years to return the budget to balance so we have the flexibility to respond to the serious economic challenges posed by the coronavirus.”

Thursday’s business package comes on top of a $2.4bn funding boost announced for the health sector on Wednesday, which will pay for up to 100 new pop-up fever clinics nationally, a new Medicare item for telehealth services and more than $1bn for medical stockpiles.

A $30m public information campaign will also be released within days.

Thursday’s package is also expected to include cash payments for households, a financial boost for pensioners with changes to the deeming rate, and help for sectors directly affected by the virus outbreak.

On Wednesday, the Labor leader, Anthony Albanese, said the stimulus response would be a test for the Morrison government, saying the Coalition needed to match Labor’s “revered” response to the global financial crisis, when a $42bn stimulus package stopped the country falling into recession.

“The immediate challenge before this government is substantial and nothing less than three decades of continuous economic growth is on the line,” Albanese said.

“Right now, we need stimulus and strategies to assist specific individuals such as casual workers, as well as our most vulnerable sectors, such as small business and the tourism sector.”

Albanese said Labor would examine any measures put forward by the government “constructively”, but was looking to ensure the package looked after the long-term national interest.

“This is not a time for reluctant economic management or mixed messages,” he said.

Before the stimulus package release, ratings agency S&P said Australia was likely to move into a recession by June 2020, recording weak growth of 1.2% for the year, before rebounding in 2021.

However, it said a “substantial” stimulus package could support short-term economic outcomes sufficiently to avoid a recession, even if it hit the budget bottom line.