A new curtain of urgency and shutdown is descending on Australia. The fight against COVID-19 has spilled into extreme measures across the states led by NSW and Victoria.
Around the nation war measures will apply starting on Monday, but a war unlike any today’s Australians have seen.
The conflict between saving the economy and slowing the virus has reached a new tipping point. Alarm about the spiralling rise in infections drove the premiers of NSW and Victoria to announce non-essential economic shutdowns on Sunday ahead of the national cabinet meeting on Sunday night.
After the meeting, Scott Morrison unveiled a set of agreed new measures that wound back some of the push from the states.
Within minutes of the release of the Morrison government’s unprecedented $66bn second fiscal package on Sunday morning, the crisis underlined the need for even more economic action.
The government has more fiscal firepower left. Morrison pledged to take more action. Josh Frydenberg said this package was not “set-and-forget”.
The moral is stark: the speed of the virus outpaces the speed of human reaction and decision-making. The complacency of the Australian public and the relentless invasion of the virus have driven leaders into draconian steps. Life in Australia will begin to be transformed this week. With the spread of the virus doubling each three or four days, the hospital system will face intolerable pressure without the trend being checked.
Across the nation non-essential interstate travel will be advised against. State border closures are growing across the continent. The AFL has suspended its season. School closure will begin in Victoria this week.
Non-essential outlets — pubs, churches, cinemas — will face closure. Restaurants and cafes can only deliver home services.
Victorian Premier Daniel Andrews said action was essential to protect the health system and halt deaths.
The size of the Morrison government package is without precedent in our history as fiscal support geared to help business keep people in a job, support the flow of loans to business and support households, casuals, sole-traders and retirees. Nobody believes it will suffice.
Announcing the economic package on Sunday, Morrison told the truth at the outset: “We cannot prevent all the many hardships, all the many sacrifices.”
But these sacrifices must not “break our spirit”. He warned after talking to the premiers of “far more draconian” measures to come. On the economy, Frydenberg said the shock will be “deeper, wider and longer”.
The government said total measures so far reached $189bn across the forward estimates, equivalent to 9.7 per cent of GDP. But this includes the Reserve Bank measures, so direct government fiscal support is actually far less. The government has avoided wage subsidies as in Britain.
While this package is huge by normal standards, it is obvious the government wanted to leave itself more fiscal scope down the track.
Morrison made clear more action would be forthcoming, branding this package as merely “the next tranche”.
Frydenberg said Treasury estimated the impact of the two fiscal packages would put about 5 per cent of GDP into the June quarter and about 7 per cent of GDP into the September quarter.
In terms of growth, this means an extra 2.75 per cent for June and 3.25 per cent for September, but that didn’t include the negative growth from the virus. In short, this is geared to a six-month strategy.
Morrison had earlier warned of the essential social distancing measures that “too many Australians are not taking … seriously enough”.
The Bondi Beach fiasco became a call to arms. But Morrison offered some hope — Australia has conducted more than 120,000 tests and the positive ratio was 0.7 per cent, one of the lowest in the world.
The breakdown of the second package reveals its priorities. Frydenberg called it targeted, temporary and scalable. The main measure costing $31.9bn over the forward estimates offers small and medium businesses up to $100,000 to help meet bills and retain staff. It should assist 690,000 businesses employing 7.8 million people.
There will also be a government guarantee to 50 per cent of new loans for small business constituting support equivalent to $20bn. Support for households, casual workers, sole traders and retirees will cost $18.1bn. Early availability of superannuation for release in two bundles of $10,000 costs $1.2bn and is sure to raise a political row.
It is a sign of our extraordinary dilemma that this package, a massive achievement by the Morrison government in such a short time, faces an improbable goal: to hold the line on jobs, investment and confidence.
Hopefully, however, it will make a real difference to many businesses and millions of people.
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