Daily Commentary BY THE CURVE TEAM –

Glimpse of Fiscal Recovery Spend

9th of March, 2021

Scott Morrison has outlined his economic plan as the economy regains the ground lost from covid.

Since the budget last year, fiscal updates have been rare. Just as RBA decisions are coming under increased scrutiny with the recent run up in yields, the update is a timely one.

Three elements in his update are of particular significance for the economy: wage subsidies, targeted industry funding and migration.

Beginning with the first, the Morrison government will transition away from the JobKeeper and JobSeeker payments but continue to provide subsidies for the hiring of trainees and apprentices. Already 100 000 subsidies have been taken up and another $1.2 billion will be available for another year, which adds to the $4 billion already spent on the scheme.

Secondly, industry support will remain for those most acutely affected by the closure of international borders, namely tourism, travel and aviation. This is a significant announcement, as there was speculation the end of JobKeeper would mean the end of support for all industries.

Finally, the willingness to accept migration is very consequential for the economy. It poses the most viable way for the economy to grow, albeit not necessarily in per capita terms.

There were concerns that migration would not be palatable in a high unemployment environment, but Morrison has tempered these concerns by explaining migrations role as filling skills shortages rather than replacing job opportunities for Australians. Wage subsidies will also at least partially alleviate concerns of migrants being unnecessary given high unemployment.

Overall, the update shows that the government still has a bias towards spending and supporting the economy rather than reigning in debt. Although it appears the intention is still to taper such support until it is no longer necessary.

Today, business survey data for February is released.

Josh Stewart

Associate - Money Markets