The multibillion-dollar cash splash began a dramatic day for the economy, with the ASX200 ending the day down by 7.4 per cent or $130 billion.
It was the largest one-day drop since the global financial crisis, eclipsing the 7.3 per cent drop on Monday. Since hitting a record high in late February, the ASX200 has shed 26.3 per cent of its value and is now where it stood in November 2016.
Health authorities are also now reviewing all travel from Europe as the national security committee considers putting up more walls around Australia to stop the spread of the coronavirus, following a move from US President Donald Trump to ban non-residents travelling from 26 European countries to America on Thursday.
Business leaders praised the federal government’s efforts to address the global downturn, with BHP chief executive Mike Henry saying the move to stimulate the economy, support small business and provide an additional safety net for the vulnerable was “the right thing to do.”
“It is vital the Parliament and the country work together and quickly to respond to what confronts us all,” Mr Henry said.
“Clearly, the coming weeks and months will challenge the Australian economy and the resolve of all Australians.”
The majority of the package will require legislation, with the Morrison government to rush it through Parliament when it returns on March 23.
The immediate stimulus payments are worth $11 billion and will be raced out from the government in just over three months. The cost all but ensures the government’s promised budget surpluses for this year and next are gone.
“That’s when it’s needed,” Prime Minister Scott Morrison said. “This is very front-end-loaded. We’ve done that on purpose.”
The cost of the package will be spread over three years and equal to more than 1 per cent of gross domestic product, but Mr Morrison said the measures would not extend beyond June 30, 2020.
“This plan is about keeping Australians in jobs,” he said.
As part of the package, tourism operators will share in a $1 billion fund waiving marine and national park fees, identifying alternative export markets and promoting domestic tourism.
Casual workers who miss shifts because they contract coronavirus or are asked to self isolate, will have waiting times abolished for sickness payments through the welfare system.
Up to 120,000 apprentices will also be getting support payments to keep them employed and 650,000 small and medium-sized employers will have access to grants of up to $25,000.
As well as the cash payments for pensioners, the government confirmed details of last week’s promise to lower the deeming rates on the back of the Reserve Bank of Australia cutting interest rates again.
The stimulus package is expected to boost the economy by 1.5 percentage points in the June quarter. With most analysts expecting the March quarter to show the economy contracting, the government is hoping it can avoid back-to-back negative quarters.
Most economists said the package should, bar any other major hits to the economy, result in Australia avoiding a recession.
Capital Economics senior analyst Marcel Thielient said combined with another cut in official interest rates, the size of the package was enough to see the economy expand in the June quarter.
“All told, today’s fiscal stimulus may prevent a recession by boosting business investment in the second quarter,” he said.
But not economists are convinced. Westpac chief economist Bill Evans said it appeared the spending would be only enough to offset some of the contractionary forces buffering the economy.
“For us, despite the government’s bold efforts the June quarter is still likely to show negative growth and Australia will experience a technical recession,” he said.
Business Council of Australia chief executive Jennifer Westacott said three in every four dollars of the package was directed to businesses.
“[This] recognises that it is business that will keep people working,” she said. “Businesses need to bring forward their investments, particularly fast-track investments that generate economic activity and jobs, especially in regional areas.”
The Australian Council of Social Service described the one-off $750 payment to those on Newstart, Youth Allowance, the age and disability pensions and other government payments as “welcome short-term relief” to people on low incomes but added, “it’s nowhere near enough”.
The Council on the Ageing said older Australians would welcome the $750 payment as well as a reduction in deeming rates.
Rob Harris is the National Affairs Editor for The Sydney Morning Herald and The Age, based at Parliament House in Canberra
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra