Coffs Coast Business, Politics

$15bn stimulus package over two years to avoid recession announced

Businesses will get up to $25,000 and instant tax relief, while welfare recipients will be eligible for one-off cash payments as part of the Government’s widely-anticipated multi-billion dollar coronavirus stimulus package.

By ABC political reporters Stephanie Dalzell and Jade Macmillan

Key points:

  • About 700,000 businesses will be able to get cash payments of between $2,000 and $25,000
  • The ABC understands there will also be cash payments targeted at welfare recipients to keep the economy firing
  • The move would be sensitive given the debate surrounding the Rudd Government’s global financial crisis cash-stimulus payments
Scott Morrison looks to the distance as he stands in a courtyard
Photo: The Morrison Government’s support package will be worth over $15 billion, the ABC understands. (ABC News: Matt Roberts)

It is understood the support package will be worth more than $15 billion, spread over this financial year and next.

The Prime Minister Scott Morrison and Treasurer Josh Frydenberg will unveil the details of their entire stimulus plan today, to try to stop the economy sliding into recession.

Josh Frydenberg and Scott Morrison entering the House of Representatives holding folders and documents.
Photo: Mr Morrison and Josh Frydenberg unveiled the details of the stimulus plan today. (ABC News: Nick Haggarty)

Ahead of their announcement, the Finance Minister conceded the Government’s forecasted budget surplus, which the Coalition trumpeted ahead of the election, was gone.

“Obviously we already were under significant pressure given the impact on revenue from the economic impact of the coronavirus, so this is obviously not going to be a surplus year in 2019-20,” Mathias Cormann said.

The Government wants its package to be temporary and offer an immediate boost to the economy, rather than making structural changes to the budget.

Some changes will start immediately, with businesses able to access an expanded instant asset write-off from today, to try to get them spending — and money flowing — as soon as possible.

At the moment, small businesses with an annual turnover of less than $50 million can claim tax deductions of up to $30,000 for things like vehicles, tools and office equipment.

But the increase will now apply to much bigger businesses — with a turnover of up to $500 million — and for much bigger items worth up to $150,000.

It would be a politically sensitive move because of the debate surrounding the Rudd Government’s decision to hand out cash-stimulus payments during the global financial crisis more than a decade ago.

The Coalition, which included Mr Morrison, attacked Labor’s approach during the global financial crisis in 2008, saying it had blown the surplus by dishing out overly generous payments.

Labor argued its package kept the nation out of recession.

The Coalition supported the first round in Parliament — which included the cash payments — but rejected the second.

Former Labor Treasurer and ALP President Wayne Swan took a pre-emptive jab on Twitter, saying “Do you trust a man who has spent 12 years saying stimulus packages don’t work to be able to deliver one?

Chief economist at BIS Oxford Economics, Sarah Hunter, said cash payments to people on welfare payments like the pension or Newstart would be an effective way of stimulating the economy.

“They’re more likely to spend money that’s transferred to them than people on higher incomes,” she said.

“And that’s for obvious reasons, because they’re already on a low income and so they have to use the majority of the pay that they have, the income they have, for funding everyday living expenses.”

First published at The ABC – Thursday 12 March 2020. See; https://www.abc.net.au/news/2020-03-12/coronavirus-economic-stimulus-combatting-the-spread-of-covid-19/12047050

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Related story: Australia to consider Europe travel ban after Trump’s move. See; https://www.smh.com.au/national/coronavirus-updates-live-world-health-organisation-declares-covid-19-a-pandemic-20200312-p5497j.html

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