Cash and tax breaks for virus-hit economy

Katina Curtis, AAP Senior Political Writer
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SCOTT MORRISON ECONOMIC STIMULUS PACKAGE

Scott Morrison said the stimulus was designed to avoid a ten-year federal budget hangover

The government will throw $4.7 billion at Australia's poorest households as part of a major push to keep the economy healthy during the coronavirus outbreak.

But the main part of its $17.6 billion stimulus will go to small and medium businesses through cash payments, bigger tax breaks on buying assets, and subsidies of apprentice wages.

"We're going to do everything we can to ensure they're best positioned to bounce back strongly on the other side," Prime Minister Scott Morrison told reporters in Canberra on Thursday.

"We can't control the source of this problem, being the coronavirus, which has come from elsewhere, but we can control our response."

From the end of March, about 6.5 million welfare recipients and pensioners will receive a one-off, tax-free $750 cheque.

Some 117,000 apprentices are expected to benefit through wage subsidies over the next nine months for employers with fewer than 20 employees.

Another $6.7 billion will go towards automatic grants of up to $25,000 to businesses with up to $50 million in turnover.

Businesses that pay salary and wages will receive a minimum $2000, even those not required to withhold tax.

The government will also spend $700 million over four years to expand the instant asset write-off for businesses.

The threshold will be raised from $30,000 to $150,000 and expand access to businesses with an annual turnover of up to $500 million, from $50 million previously.

Treasurer Josh Frydenberg said the aim was to keep Australian businesses investing and to reward them for investing even more.

Mr Morrison emphasised the temporary nature of the measures, all set to wind up by June next year, but also said they could be scaled up if the extent of the economic impact went deeper than currently predicted.

"The way we have designed this stimulus is to ensure that it doesn't have a fiscal hangover down the track, that it doesn't bury the budget for a decade," he said.

But Australia Institute senior economist Matt Grudnoff said it looked like the stimulus package was the right size but the wrong shape.

"What's most important is to keep confidence up and you do that by keeping demand up," he told AAP.

"The $750 payments are the most effective part and that's why they should have been a larger part of the overall stimulus package."

Overnight on Wednesday, the World Health Organisation declared the global coronavirus crisis a pandemic, sounding the alarm about mounting infection rates and slow government responses to curtail its spread.

There have been more than 120 confirmed cases of coronavirus in Australia, although 24 have been cleared while the prime minister says more than half are close to being cleared. Three Australians have died.

Economists predict Australia could fall into recession, but it won't be known until at least two consecutive quarters of economic data show negative growth.

The March and June quarter numbers won't be released until later this year.

Treasury has forecast the coronavirus will subtract 0.5 percentage points from economic growth in the March quarter.

However, Mr Frydenberg said the $11 billion to flow into the economy by mid-year would help boost GDP by 1.5 per cent.

On Wednesday the government announced $2.4 billion for health measures to combat the coronavirus.

Labor has pledged to support any funding for the virus response.

But Opposition Leader Anthony Albanese and shadow treasurer Jim Chalmers raised concerns about an apparent reliance on the sickness allowance - shortly to be rolled into the new JobSeeker payment - to support casual workers.

The Greens intend to try and amend the package to give every worker paid sick leave and permanently boost the rate of unemployment payments.