Grattan: Australia’s stimulus response middle of the pack

From the Grattan Institute:

Yesterday the Federal Government announced its Round 2 fiscal response to COVID-19, pushing its announced fiscal measures to $85 billion, or more than 4 per cent of GDP.

Only a few weeks ago these would have seemed incredible sums. Yet Australia is only in the middle of the pack in terms of the fiscal measures announced to date. Australia’s total package is less than half that of the UK and Spain but larger than Canada and New Zealand (Chart 1)…

Of the Australian measures to date, 62 per cent has been dedicated to business, 35 per cent to households, and about 2 per cent to hardest hit regions and sectors. Some people have criticised the government for the skew to business. But business should be a priority, because the aim is to stop this temporary hit to the economy becoming a longer-term reduction in jobs and productive capacity. Many other countries have adopted a similar approach.

The first two rounds of fiscal response so far amount to the equivalent of more than $3,000 per Australian (Chart 2). The Prime Minister has signalled he will go further if necessary. If the international experience is any guide, he may need to.

Much more will be required. My advice is to implement a temporary universal basic income immediately.

Leith van Onselen
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Comments

  1. This lot only do things piece-meal, which is a little odd given the surplus is now a distant memory. They’ll arrive at the right answers – but only after trying every other (less costly) option first.

  2. So apparently Victoria will attempt to manufacture ventilators now.

    This will be interesting to watch.

    • adelaide_economistMEMBER

      It might *just* be possible. The old blokes who worked as production engineers and had some electronics experience back when we made stuff might still not all be completely senile. I’m sure whatever we make will be the Lada of the ventilator world but if I’m lying on a bed struggling to breathe I won’t care if the ventilator is boxy and basic – just as long as it works.

      • My suggestion was to use the Bruce Lee-style Iron Lung design. An old oil barrel, some rubber, a vacuum pump. (For the vacuum – maybe use a vacuum hose from one of Gav’s Datsun engines. Those jap donks suck pretty hard, I hear 😅)

        Can we build it? Yes we can!

    • The Walkinshaw group are smart operators with a supporting group of component suppliers. I would back them against any of Scumo’s mates.

  3. I see Trump is tweeting in all-caps that he doesn’t want the cure to be worse than the disease and a decision is pending.

    Maybe 60 million will die in the US if he enacts an ‘every man for himself’ policy.

    And hat’s before the riots and eventual civil war.

    The evil empire. Is falling.

    • Didn’t think I would say this but Biden may actually win against trump. Trump is looking publicly like the illiterate coward he his.

    • China is the new superpower. The war is over before even beginning.

      China has problems, but fabric of society hasn’t been and won’t be decimated.

      In relative terms, they’ve never been stronger compared to the western world. Relative terms is all that matters.

      China will be effectively back to normal in another few months while the US will be dealing with an economic and humanitarian disaster. US GDP will probably be a minimum 25% lower going forward.

      It’s just a matter of time before the tanks roll into Hong Kong, troops invade Taiwan. It’s going to happen.

      • That’s great and all but you do realise that China depends on the rest of the world for it’s manufacturing base to export to, with demand destroyed and many countries looking to bring back manufacturing. I don’t think things are going to pan out as great as you think they will for them.

        Free trade will die as community and nationalism takes over.

        • And we depend on consumption. No-one is going to be buying takeaway coffee and boutique beers after the Great Depression of 2020-23. China will still be the manufacturing plant for the planet.

          China will end this pandemic stronger relative to the US than at any time.

          • China is probably going to be a global pariah soon. I don’t think they’ll be easily forgiven for lying about how bad the virus really is and thereby killing numbers we don’t even know yet in the rest of the world. You can’t be the geopolitical hegemon with no allies or friends.

      • Can you really have a superpower with no allies? China can aspire to Soviet Union-level basketcase superpowerdom, but even the Soviets had access to bases around the world.

        • Hill Billy 55MEMBER

          Where are you with the Belt and Road juggernaut. A planned economy is a planned economy. Me thinks they are certainly in front at the moment. And they have their minions complaining how the vicious US of A loaded up this pandemic on everyone. Interesting times – not!

      • Jumping jack flash

        Yes, they could draw on their superpower powers and create a super-virus and use it to infect the world… oh wait..

  4. Stimulating this country to the gills is just delaying the misery people will face down the track.

    Things will be bad enough going forward, but we don’t have to bankrupt the next generation because people can’t handle the shock to their system.

    The system is so fragile because of indebtedness. The solution is not trillions of debt to prop up existing debt.

    South Korea has locked down their society without bankrupting future generations.

    The over leveraged need to fail.

  5. Cruise Liner Magnifique wants to dock in Freemantle.
    1750 passengers all foriegn.
    250 cases onboard with Upper Respiratory Problems.
    WA is stuffed

    • Whoever thought Centrelink could manage demand that is ten or twenty times normal is beyond me. The queue in Cairns city went entirely around the block, all so you could register and be told to log on to MyGov, ffs. Of course we joke that the system is designed to make people give up… Which, along side the question of why encouraged people to mass together at this time (and risk their staffs) is why they should just send the money to every citizen, man, woman and child, taxpayer or not. But not to visa holders, they should be forced to fly home.

      How to pay for it? Let’s just create a liability account named MMT Emergency Spending. Fuck the borrowing, that’s just for losers.

      • A spokesperson said, people can back date the date of their application, normally you could not do that.

  6. Confirmed Covid-91 cases wont be tested for clearance after infection too save Test kits.
    Catholic hospitals have about 1 to 2 weeks of PPE left.
    The Covid-19 has hardly hit us yet, we Australians are in big trouble.

  7. So the business package, includes $100k. Is it a loan? Do you need to employ more than x2 employees?

    Schmo bumbled something about businesses getting this money on the presumption they ‘redeploy’ staff at the end. Maybe this is not the time but what stops them reneging

    In other areas they talk about landlords getting assistance (assume commercial) but in all cases shouldn’t the humans get the support which then supports the others up the chain in turn??

  8. Permanent UBI and exclude foreign “students”. Tax them to pay for it!

    4 hours ago

    the recent bushfires highlighted the plight of workers and small business owners deprived of income through no fault of their own. The recent drought and floods also identified a lack of support

    UBI system overseen by the ATO and accompanied by the abolition of the plethora of inefficient grants, exemptions and supplements would see many of the current anomalies in our system overcome. It could also mean that self-funded retirees and others benefiting disproportionately from the current broken system pay their fair share.

    UBI would mean that citizens affected by disasters would have ongoing support without the need for emergency relief, currently badly organised and administered.

    Centrelink should be almost abolished, adding to the savings.

    https://www.afr.com/politics/federal/letters-qe-hurts-confidence-in-australia-s-economy-20200323-p54cyd

    • The debt needs to be destroyed. It’s debt and obscene commercial rents that push these businesses to breaking point.

      • Jumping jack flash

        You can’t destroy debt. It has to be repaid in full plus interest. In fact the banks really like it when only the interest is paid.

        • ApproachingZero

          Unless you’re being sarcastic, of course you can destroy the debt. It’s created out of thin air by the RBA. It is literally nothing more than a number in the RBA computer. If it was destroyed in part or whole it wouldn’t affect anything except the parasitic middleman banks.

  9. Jumping jack flash

    A coronavirus-led recovery. The economy is saved.

    Retail is going gangbusters.
    In addition to the run on supermarkets, conveniently boosting retail, there’s now a run on Bunnings. Think of the demand. Think of the supply. Think of the inflation.

    Inflation is definitely back. Wages will certainly get an uptick from all the extra spending, and we needn’t worry about unemployment because there’s going to be strong demand for shelf-stackers, home-shoppers and delivery drivers during the soon to be announced lockdown. Unemployment will be lucky to crack 5% when measured against the Howard Definition.

    Its working! Captain Phil will be pleased when the next stats are released.
    Who knew the secret to a booming economy was to keep the consumers scared and locked in their homes, then feed them a steady supply of QE-cheapened debt, which they can use to panic buy everything using online shopping.

    Genius. Pure genius.