Daily Commentary BY THE CURVE TEAM –

More Stimulus Measures Amid Shutdown

23rd of March, 2020

The Federal Government has announced another round of stimulus measures as stage one of the economic shutdown begins.

Over the weekend, the Federal Government finally announced the much anticipated second stimulus package. The $66bln package consisted of further cash handouts, more assistance for small business via cash and loans and the ability for some people to dip into their super in times of financial stress.

Between the Government and the RBA, the total amount of stimulus being provided to date added up to around $190bln or close to 10% of GDP. Most of which is in the form of debt and tax deferral rather than actually cash handouts. It is also based on the assumption that most businesses will continue to operate at a reduced capacity.

Following the new stimulus measures was another announcement on containment measures to slow the spread of the virus. As the spread in Australia is tracking roughly inline with other western countries, shutdowns of non-essential businesses linked to socialising will come into effect from midday today. Some States were pushing for stronger measures, which are likely to eventually come into effect when stage 2 of the shutdown is formally formulated.

If we are to draw on the experience of other western nations overseas, who are only weeks ahead of us in terms of the spread of the virus, these measures are unlikely to be enough. We are going to need to see far more support forthcoming for the economy and wider spread and more stringent containment measures are required.

David Flanagan

Director - Interest Rate Markets