The Morrison government is looking to avoid a recession in the wake of the coronavirus outbreak, with a $23 billion stimulus package to boost the economy.
Prime Minister Scott Morrison on Thursday outlined initial measures of the $22.9 billion package.
The stimulus package aims to prevent the Australian economy entering a recession as the globe grapples with the coronavirus outbreak.
The package’s focus on supporting small business through cash payments, wage subsidies for apprentices and trainees and a significant expansion of the instant asset write-off is key to keeping people in work and helping the Australian economy bounce back.
“We’re going to do everything we can to ensure they’re best positioned to bounce back strongly on the other side,” Mr Morrison told reporters in Canberra.
“We can’t control the source of this problem, being the coronavirus, which has come from elsewhere, but we can control our response.”
Mr Morrison will flesh out the plan in a rare televised address to the nation on Thursday night.
The measures are set to end by June next year, but the government says the plan is ‘scalable’ if further measures are needed.
Senator Cormann admits there are no strings attached to the business payments.
“We say to all of those businesses: ‘We’re doing our bit to support you, we want you to support your staff during this period,” he told ABC radio.
Key small business plans:
- About $6.7 billion over four years will go towards automatic grants of up to $25,000 to businesses with up to $50 million in turnover. These grants, between $2000 and $25,000, will be paid automatically to businesses who employ people, with the trigger being them sending their employees’ tax withholdings to the tax office.
- 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.
- About 117,000 apprentices are expected to benefit through wage subsidies for employers with fewer than 20 employees. The cash injection will subsidise apprentice wages for up to nine months with the aim of keeping them in a job in challenging economic circumstances, which the government admits will put pressure on small businesses.
- Casual workers unable to attend work due to coronavirus will be eligible to apply for the Government’s sickness payment.
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 compiled by the Australian Bureau of Statistics won’t be released until later this year.
Treasurer Josh Frydenberg said the $11 billion to flow into the economy by mid-year would help boost GDP by 1.5 per cent.
Greg Ellis, CEO of MYOB, welcomes the Prime Minister’s plan.
“Today’s announcement of sliding scale tax-free cash grants, wage subsidies for trainees and apprentices, accelerated depreciation deductions, and a significant boost to the instant asset write-off scheme will go a long way toward helping small business owners to manage their cash flow and to retain their employees through this turbulent period.
“Australia’s two million small businesses are the heartbeat of our economy, and after a very difficult start to the year due to the bushfire crisis, and now the impact of coronavirus, our priority is not only to help small business survive but also to come out of this stronger.”
Roger Mendelson, CEO of Prushka Fast Debt Recovery, says that although the stimulus package is a sensible response, there are bigger concerns that have not been addressed that could be catastrophic.
“A scheme needs to be considered whereby businesses with turnovers of less than $25 million annually could offset wages for workers against GST liabilities of the business, so they can keep paying laid off workers,” Mr Mendelson said.
“Without this, there is a real risk to businesses that rely on weekly revenue to meet their payroll.
“There is then a flow-on impact to households where we’ll see an increase in mortgage defaults and residential rent arrears due to lost wages.
“The stimulus payments will be effective, however a voucher system would be more reliable in injecting cash back into the Australian economy at a fast pace.
“I have concerns the instant asset write-off increase won’t provide a meaningful impact for many businesses until it’s too late, given the direct financial benefit won’t hit until after tax time.
Business are more worried about keeping their doors open and other immediate issues, so this is unlikely to be effective as the benefits are remote and far away.”
Australia’s 1.5 million sole traders won’t benefit from the bulk of the economic stimulus measures.
Although grants will be paid automatically to businesses who employ people, more than three in five businesses in Australia don’t employ anyone other than the owner.
In the rock lobster and crab industry – which has been singled out by Prime Minister Scott Morrison as a sector hit particularly hard by the coronavirus – just 516 out of 1638 businesses have any employees.
Mr Morrison says his government’s main focus is on employers.
“We’re supporting some 690,000 businesses that employ Australians because, as I said, it’s about keeping Australians in work,” he told reporters in Canberra on Thursday.
Council of Small Business Organisations of Australia head Peter Strong says while the focus on employers is understandable, there needs to be a level of personal support for sole traders.
“If they are struggling with their business because they’ve got no customers … there’s a different package that we need to look at,” he said.
“Because when the virus is finished, then the whole idea is that they’ll be able to re-trade.”
Victorian Chamber of Commerce and Industry Chief Executive, Paul Guerra, said, “This package won’t solve the coronavirus problem but will help ease the cashflow hardship many businesses are facing and help them to pay bills, pay staff and stay afloat.
Prime Minister Scott Morrison will address the nation on Thursday evening to explain Australia’s response to the spread of the coronavirus.