In sheer dollar terms, the Government’s response to the economic impacts of the COVID-19 pandemic has been amongst the largest in the world (per capita).
That response has been multi-layered. Also, the Government has extended some of the support measures already in place.
Thanks to lockdowns, restrictions on state-to-state travel and the effective closing of industries like international education and tourism, many people’s jobs have been lost or come under threat. Others have been forced to cut their hours or accept lower remuneration.
To combat the slowing effect this will have on the overall economy, the Government introduced JobKeeper—a subsidy to employers and the self-employed to help them keep their staff.
Under the JobKeeper program, eligible employees (and the self-employed) are able to receive $1,500 each fortnight, up to 27 September 2020. The Government has extended the program to March 2021, though there is significant tapering of the amounts paid from 28 September 2020.
Supporting households and pensioners
When the pandemic first hit our shores, the Government also instituted a series of additional payments to those on income support or social security and extended the eligibility criteria for some payments. In recent announcements, the Government has fine-tuned these changes to reflect both their cost to the budget and the needs of recipients.
The Government has also instituted a range of reforms and funding measures to support small business and encouraged banks, landlords and businesses to extend credit or payment holidays to their customers.
And then what?
The COVID-19 crisis is still evolving and there may be additional changes to the Government’s policies over the coming months.
We are now getting a clearer picture of the cost of the crisis. Treasurer Frydenberg has recently revealed that the impact of lower business activity and massive welfare support will move the Federal Budget from an (expected) small surplus to a massive deficit of around $86 billion for 2019/20.1 The deficit for 2020/21 will be much bigger.
Despite this massive budget reversal, Australia will still be a relatively low-debt country compared to many of our peers. With the cost of Government borrowing so low, many economists regard this expenditure on supporting households, jobs, and businesses as sensible and prudent.
While a return to strong global growth may need a vaccine or cheap and highly effective Coronavirus treatment, the Australian economy is likely to recover much more quickly if unemployment is low and overall demand in the economy is supported via taxpayer dollars.
1Economic and Fiscal Update July 2020. Statemen by The Honourable Josh Frydenberg MP Treasurer of the Commonwealth of Australia and Senator the Honourable Mathias Cormann Minister for Finance of the Commonwealth of Australia. 23 July 2020. https://budget.gov.au/2020-efu/downloads/JEFU2020.pdf. Accessed 23 July 2020
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