Morrison Government’s ‘substantial’ coronavirus stimulus package could include Rudd-style cash handouts

After previously ruling it out, the Government is understood to be considering a cash handouts as part of its surplus-busting stimulus package.

The Morrison Government is set to give up on its promised Budget surplus as it prepares to deliver a multi-billion dollar stimulus package this week to deal with the coronavirus outbreak’s hit to the economy.

Sky News Political Editor Andrew Clennell has revealed Mr Morrison is in discussions with his team for ways to distribute close to $10 billion in stimulus to help the economy, and is considering a Kevin Rudd-style cash handout as part of the package.

Clennell said “even cash handouts to ordinary citizens” were still “on the table” but the idea was facing fierce opposition from Finance and Treasury officials who were reluctant to offer the package to ordinary citizens.

“Even cash handouts to ordinary citizens are still on the table as the Government wrestles with its stimulus package,” Clennell said.

“I understand cash handouts similar to what occurred in the Rudd era have not been ruled out but Finance and Treasury officials are said to be pushing back against this sort of stimulus and the PM would seem reluctant on it as well.”

The consideration signals a shift from last week, when Treasurer Josh Frydenberg ruled out a “cash splash” to stimulate the economy, similar to Labor’s 2008 global financial crisis response.

“We won’t repeat the mistakes of the past with cash splashes,” he told Sky News.

According to Clennell, the Government is now also considering dishing out hundreds of millions in cash to small businesses in wage subsidies, along with business tax incentives including increasing the asset write-off.

Such a stimulus hit would mean the Government sacrificing its promised Budget surplus to avoid recession.

Mr Frydenberg today faced questions from reporters over whether the Budget would ever get back to surplus.

In a telling response, the Treasurer said: “I know that we’re in balance, and that’s a significant achievement.”

“It’s taken six and a half years but we’ve brought the Budget back to balance, and that’s part of the economic plan for Australians to live within its means,” Mr Frydenberg said.

In the mid-year budget review in December, Mr Frydenberg forecast a $5 billion surplus, which would have been the first in a decade. The Government gloated about the Budget’s predicted return to surplus with a “back in black” campaign last year.

That surplus looks to be dead, although it won’t be clear until the next Budget in May what the exact hit will be.

Meanwhile, the Morrison Government is reportedly putting the finishing touches on its stimulus package to counter the economic impact of the coronavirus.

Mr Frydenberg said support would be delivered using existing tax and transfer systems, which takes in welfare payments, family assistance and pensions.

He described the package under consideration as “substantial” – an upgrade from what he and Prime Minister Scott Morrison previously said would be a modest or measured response.

“It will be designed about getting support to those who need it but also we won’t undermine the structural integrity of the budget,” Mr Frydenberg told reporters in Canberra.

“It won’t undo all of the good work that we’ve done over the last six-and-a-half years to get the budget back on track.”

The share market shed nearly 6 per cent – about $120 billion – on Monday’s opening amid ongoing panic over the impact of coronavirus and an oil price plunge.

Mr Frydenberg sought to calm things, saying market volatility was not uncommon in times like this and there were a number of factors at play.

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Treasurer Josh Frydenberg speaks to the media during a press conference at Parliament House in Canberra on Monday. Picture: Lukas Coch/AAP

The stimulus package has been tipped to include tax incentives to help businesses with cash flow, alongside tax deductions for new investments.

Funding will be also aimed at infrastructure spending, which normally translates to major road and rail projects.

“It will be worth billions in the terms of the impact it will have,” Mr Frydenberg told Sky News last week.

“The package of measures will be responsible and will be scalable.”

Cabinet will meet on Tuesday to consider the package, with an announcement likely later in the week.

ACTU secretary Sally McManus said the package must address the financial risk to Australia’s 3.3 million casual workers in retail, hospitality, health and aged care, who will lose pay if they get sick.

“We don’t want people with virus or people with symptoms going to work, but they are going to have to choose between paying the bills and feeding themselves or going to work,” she told Nine’s Today program on Monday.

Prime Minister Scott Morrison (right) and Treasurer Josh Frydenberg during Question Time last week. Picture: Lukas Coch/AAP

Ms McManus noted other countries impacted by the virus were guaranteeing that casual workers wouldn’t be penalised if they had to self isolate. “It should be just paid leave,” she said, with employers compensated later on.

Business is calling for tax relief and a regulation and red tape “holiday”.

The government may consider reducing deeming rates for pensioners, giving local councils funding for small projects and an expansion of instant asset write-offs for businesses.

The spread of the virus, although not rampant, has already caused panic buying of toilet paper across the country.

Opposition health spokesman Chris Bowen said Labor would support a “sensible” direct household stimulus package, similar to the payments Australians received under the Rudd government during the global financial crisis.

Last week the Prime Minister dodged saying whether Australia risked a recession in the face of a growing coronavirus crisis.

Asked during Question Time on Thursday whether he could guarantee Australia would not suffer a recession, he said: “I can guarantee the Australian people that they will get the strong economic management they voted for”.

Treasury boss Steven Kennedy earlier told the Senate economic committee the virus could slice “at least” 0.5 percentage points from economic growth in Australia in the March quarter, reflecting the impact it has had on tourism, education and the Australian dollar.

This would come on top of the 0.2 percentage point detraction from growth from the bushfires.

“Beyond this preliminary estimate for the March quarter it is too early to tell, given the uncertainties, what the full impact of the COVID-19 coronavirus will be on the economy,” he said.

The extent of the impact of COVID-19 will depend on a number of factors – how quickly it spreads, disruptions to ports and, should it become more prevalent in Australia, the direct impact on activity.

A recession is classified as two consecutive quarters of economic contraction, something Australia has not suffered for almost three decades.