Over the last few weeks, we’ve seen many stories about decreased activity in the economy and stock markets taking a nosedive.
The Coronavirus disease (COVID-19) control measures have seen wild fluctuations in markets over the past few weeks. The Australian share market is officially in a “bear market” which means losses of at least 20% from all sectors.
The social distancing directives and bans on large gatherings over 100 people means many businesses are feeling the pinch of decreased economic activity. This has a flow-on effect on jobs, expenditure, and economic growth.
To encourage avoid a recession as much as possible the Reserve Bank of Australia cut interest rates to 0.5% and is expected to cut them again to 0.25% in an emergency meeting this month, the lowest on record.
In response, the Federal Government unveiled a stimulus package for to assist households and businesses.
The government will announce a new round of stimulus measures in the coming days. This is what has already been proposed:
Pensioners and welfare recipients
As part of the first stimulus package announced on the 13th of March, the Federal Government will be sending one-off cash payments of $750 to social security, veteran and other income support recipients and eligible concession card holders to support the economy.
These payments would reach people starting 31st of March and more than 90% of payments are expected to be made by mid-April.
Small and medium-sized business will be eligible for up to $25,000, with a minimum payment of $2,000.
This is a measure to cover the costs of employee wages and salaries, paid by the Australian Taxation Office based on tax withheld. This does not apply to sole traders or the self-employed.
Approximately $1.2 billion will be made available as a wage subsidy to keep apprentices and trainees in work for up to nine months – January to September 2020.
The government is also providing $3.9 billion in incentives to keep business spending. This includes lifting the instant asset write-off threshold to $150,000 from $30,000 and granting more eligibility to business to use it.
Businesses will also be able to access an investment incentive called the Backing Business Investment (BBI). According to Business.gov.au, BBI is "A time limited 15-month investment incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions. This applies to eligible assets acquired from 12th March 2020 and first used or installed by 30 June 2021. Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost.”
Severely affected regions
The government is setting up a $1 billion fund for regions most effected by the coronavirus disease outbreak. There will also be a fee waiver for national and marine parks to boost tourism.
Guarantees on deposits
In the aftermath of the Global Financial Crisis of 2007-8, the Federal Government instituted the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding (the Guarantee Scheme). This guarantees deposits of up to $250,000 per customer and per institution. This is to ensure institutions could still access funding and promote financial stability.
There are more stimulus measures to come in the coming weeks and months – check back regularly for updates.