Fears of recession linger

$17b stimulus welcomed, but may not be enough

ECONOMISTS maintain that a recession is still possible despite the Federal Government’s $17.6 billion economic stimulus package.

Prime Minister Scott Morrison announced the funding yesterday as part of efforts to help the economy weather the impacts of the coronavirus outbreak. The measures include giving 6.5 million welfare recipients and pensioners a $750 payment, and automatic grants for small and mediumsized businesses of between $2000 and $25,000.

AMP Capital senior economist Diana Mousina (right) said the measures were decent but predicted they would not be enough.

“The key question is – will this stimulus be enough to ward off an Australian recession. We think no,” she said.

Fewer Chinese tourists and students, along with damage from the bushfires, would hurt a weak economy, she said.

Commsec chief economist Craig James said the stimulus was a good first step but would not supercharge the economy.

“Neither does it guarantee that the economy won’t slip into recession,” he said. Business leaders were upbeat about the stimulus.

Australian Retailers Association executive director Russell Zimmerman was confident the cheque recipients would spend, rather than save, the money.

“I believe these are people living week to week and can’t afford the simple things in life, like clothing and footwear,” he said. “Our view is that money will get spent in the retail industry.”

Australian Industry Group chief executive Innes Willox said recipients might put some of the money aside but expected they would spend and help sales.

Mr Willox was mostly happy with the stimulus and said it would reduce the risk of a more severe downturn.

However he wanted more payroll tax relief for larger employers.

Australian Investment Council chief executive Yasser El-Ansary said the payment to welfare recipients and pensioners was the right policy approach.

He was pleased by the measures, but said more help was needed for industry to innovate and grow.

Mr Zimmerman was also optimistic about measures aimed at preventing employers laying off apprentices.

Small businesses will get up to $7000 each quarter for apprentices as a wage subsidy.

“Our concern is they keep their employees, particularly small business,” he said.