The Dow Jones has dropped a whopping 25% since the announcement of the Coronavirus, and the All Ordinaries, representing the Australian stock market, has declined a little over 26% since the peak. With mass hoarding of toilet paper, armed robberies for hand sanitisers and face masks, irrational thinking is clearly on the rise. With so much irrationality in the market at present, we would like to take a moment to explore the Australian Government’s fiscal response to the virus.

The Government has recently announced a stimulus package of $17.6 billion to support the Australian economy at this time, ensuring that people can retain their jobs and continue to meet their household and business expenses. This is not an insignificant amount of money and to put it in perspective, it represents 0.9% of our nation’s annual GDP. A further $2.4 billion has been committed to the healthcare system with the aim of ensuring that we have sufficient resources to assist anyone diagnosed with having the virus to ensure a swift recovery.

While the number of cases in Australia is currently low, the Government is committed to ensuring that we have sufficient resources available should they be required. Border controls have been enhanced, travel restrictions are in place, particularly for anyone travelling from China or Macau, and masks have been released from our national stockpile. Unfortunately, with Australia being such a vast nation, it is far more difficult to enforce border controls than for a country such as Singapore, which has been highly effective at doing so in a short amount of time.

The Government has also recommended that all non-essential mass gathering events be cancelled, including sporting events, although some have still decided to proceed over the weekend just recently as the new ruling didn’t come into effect until Monday. Unfortunately, this sort of stupidity has been allowed to take place and we simply hope that it does not impact too many and increase the number of cases in Australia too much.

Further to these measures, the Federal Government has outlined that they will commit to pay half of all costs incurred by each state and territory as a result of treating patients with the virus, or anyone who is suspected of having it.

Specifically, the f­­­unds that the Government has pledged will be put to work in the following ways:

Increased asset write-offs for businesses

The instant asset write-off threshold has been increased from $30,000 to $150,000, which should significantly benefit businesses.

New business investment incentive

The Government will now be allowing businesses with turnover of less than $500 million to deduct 50% of the cost of a new asset upon installation.

Business cash flow boost for employers

Small businesses will receive up to $25,000, with a minimum payment of $2,000 to eligible businesses that are employing staff to assist in meeting wage payments.

Social security boost

Those on social security and veteran payments, including pensioners, will receive a boost with a one off $750 payment. This one is not too dissimilar to Kevin Rudd’s $900 ‘plasma screen’ payment from his time in leadership.

While these are certainly positive measures, we believe more needs to be done to ensure that we can contain the spread of this virus including enhanced temperature checking, greater access to resources and information, and ensuring that companies are monitoring staff. We will be monitoring the situation and data closely, however at this stage certainly do not expect that the outbreak of the Coronavirus will be anything similar to the Global Financial Crisis (GFC) in its impact.

 

 

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