Second round of stimulus must create safety net for virus-hit workers
Calls for fiscal policy to stimulate demand and investment are fighting the last economic war. A straight-talking and straight-thinking government would make households the second package's core focus.
In a crisis the public wants straight-talking. The unvarnished truth is that the economic effects of COVID-19 and the associated public health response will be enormous. Recession is practically inevitable. But the right government response can minimise the damage a sharp contraction this year will have on the Australian economy in the long term.
There will be multiple COVID-19 shocks. The first is the supply shock. Over the next few months many businesses will be hit by a reduction in supply of imports, particularly manufactured goods from China. Supply-side problems will become widespread as workers take time off because they are sick or required to follow "social distancing" rules.
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Danielle Wood is the chairwoman of the Productivity Commission.
Brendan Coates is the economic policy program director at the Grattan Institute.
