Australia’s government yesterday said it would pump A$17.6 billion (US$11.3 billion) into the economy to try to stop the coronavirus outbreak triggering a recession, as it weighed an extension of travel restrictions following a formal pandemic declaration.
The country’s first stimulus package since the 2008 global financial crisis, which helped Australia avert a recession then, illustrates the lengths the government would take to pare the economic effects of the outbreak.
Despite only affecting about 130 people in Australia so far, with three confirmed deaths, economists expect the outbreak, classified as a pandemic by the WHO, to cause a recession in the second quarter.
Photo: EPA-EFE
The package would subsidize the wages of 120,000 apprentices, offer one-off cash payments for welfare recipients and give up to A$25,000 to small businesses, Australian Prime Minister Scott Morrison said at a news conference in Canberra.
“This is a comprehensive, a well-thought-through, a well-targeted plan, which is designed to support the Australian economy, and jobs and businesses through the difficult months ahead,” Morrison said.
More than 6 million welfare recipients, notably pensioners and unemployed citizens, would receive a one-off cash payment of A$750 from March 31, Morrison added.
Speaking with the Morrison, Australian Treasurer Josh Frydenberg said that most of the package would be spent immediately, potentially boosting the economy by 1.5 percentage points in the second quarter.
News of the stimulus came minutes before US President Donald Trump announced a 30-day ban on incoming travel from continental Europe, sending Australian stocks, which were trading down about 3 percent, tumbling to close down 7.4 percent.
The effects of the stimulus package remain unclear while the pandemic widens.
“Whether a recession can be avoided is still an open question as the management of the COVID-19 health crisis dictates the economic fallout,” Australia and New Zealand Banking Group analysts said in a note.
Further to halting the disease spread, the Australian government said that it would extend by a week existing travel bans on China, Iran, South Korea and Italy, which have reported higher numbers of people with the illness, while an emergency health committee would review whether to place a travel ban on all of Europe.
Ratings agency S&P on Wednesday said that it expected Australia to fall into recession in the first half of this year, but the government’s strong fiscal position allowed for stimulus without threatening its “AAA” credit rating.
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