This could include offering ultra-low interest loans direct to commercial banks that must be passed on to businesses in a bid to keep them operational.
Senior government sources told The Sydney Morning Herald and The Age a plan to waive more than $1 billion in levies imposed by Airservices Australia will also be considered, which would save Qantas about $350 million and Virgin around $180 million.
The government is also preparing for a temporary freeze on all MPs’ salary increases, similar to that imposed by the Rudd government a decade ago, to send a message to the corporate world to consider the same.
The size of the expected economic hit is growing as the government considers new measures to halt the spread of the virus.
While schools have not been closed there are growing expectations the April holiday period will be extended for several weeks.
Capital Economics senior economist Marcel Thieliant said if schools were closed it would deliver a huge blow to the economy.
He said up to 1.85 million parents, or 14 per cent of the workforce, would be required to stay home to care for their children.
“We estimate that a four-week school closure could knock off as much as two percent from quarterly GDP,” he said.
The new self-isolation requirements for people entering the country would knock 0.5 percentage points from economic growth both in the March quarter and the following June quarter.
Mr Thieliant said this meant a recession was now almost “inevitable” for the country.
The decision to impose mandatory 14-day quarantine measures on all international travellers is likely to have major ramifications on the tourism and hospitality sector, including the major airlines, which is where a new economic package will likely target.
Prime Minister Scott Morrison is having “rolling” meetings with key cabinet ministers on Tuesday ahead of Tuesday night’s National Cabinet meeting.
He warned the economic consequences of halting the spread of the virus would have “very significant” impacts, which would go “well beyond” the Global Financial Crisis.
“I mean, in the GFC, we didn’t have to shut down the borders. In the GFC, we didn’t have to stop mass gathering of the public,” Mr Morrison told Melbourne radio 3AW.
“This is of an order well beyond what we saw last time. And it’ll be a challenging period. But, you know, Australians will come through.”
Figures from the Australian Bureau of Statistics on Monday showed the number of tourist arrivals in January fell by 3.3 per cent. At an annual rate, it was the biggest fall in eight years.
Visitor numbers from China were 18.2 per cent lower than in January 2019. This was before the federal government’s ban on non-citizens from China started on February 1.
Figures out of China highlighted the depth of the economic problems it is facing in the wake of the virus outbreak.
Industrial production in January and February collapsed by 13.5 per cent, the worst result on record, while services production contracted by 13 per cent. Combined, they suggests shrank through the first two months of the year by 13 per cent, the first contraction since 1976.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Rob Harris is the National Affairs Editor for The Sydney Morning Herald and The Age, based at Parliament House in Canberra