A second round of stimulus, aid spending, business loan guarantees and relaxed rules on superannuation are among the new measures from the Morrison government to shield millions of workers from the approaching economic slump.
The centrepiece worth is a $25.2 billion cash injection to ensure employers can keep paying wages if the coronavirus crisis whacks their business.
This latest package is valued at $66 billion and is on top of the $17.6 billion from 10 days ago and is in addition to the $105 billion in lending and support from the Reserve Bank and the Treasury and Office of Asset Management.
It’s an unprecedented level of spending to protect jobs from a government. The $25 billion in direct support to business is above and beyond the spending in the same area from the Rudd government at the start of the GFC.
The federal government will also transfer up to $50,000 to small and medium businesses within weeks and will offer another $50,000 in the new financial year to confront fears of widespread lay-offs.
The annual amount of up to $50,000 is on top of a similar cash injection of $25,000 a year announced two weeks ago.
The government will also guarantee half the value of new bank loans to small and medium companies to unlock up to $40 billion in finance.
Yesterday saw the Commonwealth bak announce another $10 billion of unsecured lending for small and medium business. That will be a quarter of the loan guarantee scheme.
Prime Minister Scott Morrison said the measures were about getting the country through “the next six months or longer” to make sure employers could keep going or at least suspend operations during the worst of the impact.
“We want to help businesses keep going as best they can or to pause instead of falling apart,” he said.
“We want to ensure that when this crisis has passed Australia can bounce back. There is a lot of pain coming but we’re going to cushion the blow as best we can.”
The assistance will go to companies with annual turnover of up to $50 million and will not be restricted to any industry, ensuring the money hits the economy as fast as possible.
Because the cash injection will be linked to a company’s wages bill through the taxes an employer withholds during the year, a company that sacks staff would have its payment cut or cancelled.
The government believes the cash will go to about 690,000 businesses and 30,000 not-for-profit organisations.
This means supporting about 7.8 million workers, including about 2.5 million in NSW, 2 million in Victoria, 1.5 million in Queensland, about 810,000 in Western Australia, 480,000 in South Australia and 115,000 in the ACT. The Australian work force was 12.99 million people at the end of February, so there’s a big chunk not covered.
Treasurer Josh Frydenberg has told the Tax Office to set up a system to calculate the payments within days of companies lodging their business activity statements (BAS).
Monthly BAS forms due to be lodged on April 21 and quarterly BAS forms due on April 28, will allow the first payments to be made soon afterwards.
While the loan guarantee does not involve government spending, it is a significant measure that leaves taxpayers on the hook for 50 per cent of the new loans if companies cannot repay.
The Coronavirus SME Guarantee Scheme will be offered by banks and other lenders to small employers who need finance to ride out the downturn in business, with taxpayers guaranteeing 50 per cent of the value of the loans.
The loans can be unsecured but must be granted during a six-month period starting on April 1 and cannot be used to refinance existing loans. The Rudd government guaranteed borrowings by banks for three years which with the $250,000 deposit guarantee, helped right the ship in 2009 and beyond.
In fact that more than anything, other policy helped calm markets and nervous investors and depositors. The deposit guarantee stopped a quiet run on banks that saw depositors withdraw around $10 billion in late 2008 and early 2009. The Reserve Bank had to print $10 billion in new currency and deliver it to banks to maintain note levels.
The loans will not require repayments for the first six months and the maximum loans will be $250,000 for terms of up to three years.
