CANBERRA: Australia has unleashed a record A$130 billion jobs-rescue plan, pledging to subsidise workers’ wages as the coronavirus outbreak wreaks havoc on the economy.
The package will see the government pay wage subsidies of A$1,500 every two weeks per employee to help struggling businesses keep people in work, Prime Minister Scott Morrison told reporters in Canberra on Monday.
The announcement brings total fiscal and monetary stimulus to buttress the economy to A$320 billion, or 16.4% of gross domestic product.
In a sign of how quickly things are deteriorating, Morrison had as recently as last week rejected the need for a UK-style wage subsidy, saying it would take too long to implement.
“Now is the time to dig deep,” Morrison said as he unveiled the package. “We are living in unprecedented times. Our goal is to protect the lives and livelihoods of Australians.”
The virus has smashed the economy and Australia’s unemployment rate could soar to 12%, from 5.1% in February, as potentially hundreds of thousands of workers lose their jobs amid the shutdown.
Fashion and homewares chain Country Road on Saturday joined a swathe of retailers closing their doors as consumer confidence slumps and people stay at home.
The package “may not prevent a recession but will go some way in tempering the depth and possibly duration,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney.
Australian shares posted their biggest one-day gain on record, climbing 7%, as the government announced the measures. The S&P/ASX 200 index added more than 100 points during the closing auction, which starts 10 minutes after normal trading ends and today coincided with Morrison’s announcement.
What Bloomberg’s economists say:
James McIntyre, economist: “This is the third, but definitely won’t be the final, firing of the ‘fiscal cannon’ in Australia. The wage subsidy boost will help to save more of the furniture, help more businesses survive and jobs be retained. But it won’t undo all of the damage, which will require further substantial, and sustained, fiscal support to help the economy recover.
The subsidy is equivalent to about 70% of the median wage and will be paid to employers for six months, Treasurer Josh Frydenberg said.
Morrison on Sunday limited public gatherings to just two people under tighter social-distancing controls as the national death toll climbed to 16.
As of 6am Monday, there were 4,093 confirmed cases of the virus in Australia.
In other steps announced Monday:
Australia’s banks extended a six-month deferral of loan repayments to 98% of companies. The support was initially extended only to small businesses.
Tighter restrictions will be imposed on foreign takeovers, with all deals needing government approval, regardless of size.
Last week, Australia’s parliament rushed through more than A$80 billion in fiscal stimulus for the coronavirus-stricken economy at a special sitting in Canberra.
The measures put in place this month by the government and central bank include cash payments of as much as A$100,000 to small businesses, loan guarantees, support for apprentices and the doubling of unemployment benefits. The worst-hit workers will also be allowed to access pension savings early.