The Australian government has ordered a partial shutdown of non-essential services from 12 p.m Monday 23/03/2020 to curb the advance of the Coronavirus.
Hundreds of thousands of workers in the hospitality and tourism sectors have been made redundant in the matter overnight, which likely will create spillover effects to other sectors of the economy.
However, on the bright side, the government has implemented big and bold policies to assist businesses and workers going through this trying time: to keep businesses in business and workers in jobs.
A total package of $189bn, equivalent to 10% of GDP has been approved by the government to support businesses and displaced workers. The size of the package is unprecedented, targeted to the most hard-hit individuals and businesses, especially the services sectors.
The key points:
$550 per fortnight income supplement, on top of existing $550 per fortnight to jobseekers, totaling $1,100 per fortnight
$750 one-off payment will be paid on 31st March 2020 to all people and to all social security, veteran and other income support recipients and eligible concession cardholders. This includes those on Newstart, those who have commonwealth seniors health cards, and families receiving family tax benefits. The next $750 one-off payment will be paid on 13th July 2020.
Emergency access to super funds: $10,000 in 2019-2020 and $10,000 in 2020-2021 to workers who are affected by the Covid-19.
Mortgagees may be able to defer mortgage repayment by up to 6 months if they have mortgages with the big four banks.
Businesses: the tax-free payment is worth 100% of the tax that small and medium-sized businesses withhold from their employees’ salaries and wages up to a maximum amount of $100,000. The amount is paid by ATO based on the Activity Statements. This measure aims at encouraging employers to keep their workers in jobs.
Businesses will have the option to defer loan repayments by 6 months.
Businesses will have access to a new “coronavirus SME guarantee scheme” worth $40bn, which can be applied through bank and non-bank lenders to businesses disrupted by the virus.
50% subsidy of the wage for apprentices for up to nine months from 1 January 2020 to 30 September 2020.
Incentives worth $3.9bn to encourage businesses to spend, which includes increasing the instant asset write-off, by lifting the threshold to $150,000 (from $30,000) – and making more businesses eligible to use it.
The government is also undertaking a third stimulus package that focuses specifically on providing wage subsidies to workers that have been stood-down, similar to the subsidy announced in the UK.
How long will the virus crisis last in Australia? We do not know. However, based on what happened in China, it is estimated to take about 3 months for the virus to reach the peak, then the number of infections will be reduced gradually and under control. By that time, the government will likely implement the next round of stimulus measures such as investment in large infrastructure projects and financial support to businesses.
The property market is surely affected by this period of time. We are unsure about the magnitude of the effect until more economic data becomes available. However, it is likely that the deferral of mortgage repayments, together with income support for people who lost their jobs will significantly reduce the chance and severity of a property market downturn.
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