Just days after announcing the $17.6 billion stimulus package, the Morrison government is reportedly considering another sizeable cash injection as the Covid-19 crisis worsens.
The initial package, which included $750 payments for Australia’s 6.5 million welfare recipients among other measures, was described as “right size, wrong shape” by think tank The Australia Institute and criticised by unions and social services groups for not doing enough for casual workers.
“The $750 one-off payment to welfare recipients provides the best bang for taxpayer buck. We know people living on the brink spend any extra money they receive on essentials, and this will support demand in the economy,” The Australia Institute said.
However, the thinktank said other measures targeted at boosting business investment would largely fall flat, with boosts like the instant asset write-off and acceleration depreciation initiatives failing to prompt struggling businesses to invest.
The Institute said future stimulus needs to have a greater focus on funnelling money through social security and community services, over business incentives.
Now Prime Minister Scott Morrison, Treasurer Josh Fydenberg and Finance Minister Mathias Cormann are discussing a new package, according to reports in The Australian Financial Review.
The three leaders are reportedly considering extending a few of the measures previously announced, while adding new initiatives that would contain more support for business and households.
The three are expected to announce the measures within the next week.
The reports come as the Reserve Bank of Australia (RBA) prepares for quantitative easing by purchasing government bonds.
The RBA will also meet on Thursday, where pundits believe the Bank may well announce an emergency rate cut as both the US and New Zealand have done in recent hours. The two central banks cut interest rates to 0 and 0.25 per cent respectively.
Nine News political editor Chris Uhlmann said the government considers the situation “so dire” that another cash injection will be required.
‘Won’t stop a recession’: Expert’s warning
Westpac economists said the package doesn’t go far enough, suggesting those who receive the $750 will most likely save it.
“This initiative should be applauded but it is likely in this environment that pensioners will save around 75 per cent of the payment,” they said.
“The spending rate is likely to be higher in the social security and income support groups. However with limited savings these groups are also likely to save around 60 per cent of the $750 payment.”
Economist Shane Oliver said the package, while welcome, won’t stop a recession as the virus and lockdown impact will be simply too strong.
More to come.
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