Will stimulus package be enough?

The coronavirus-induced panic that has caused the great run on toilet paper is not confined to the herd instinct of millions of shoppers. Fear of being the first government to preside over the end of 30 years of uninterrupted growth is gripping Scott Morrison and his entire Coalition outfit.

Forget the easy commentary – that the prime minister talking about nothing but the virus and the end of the world as we know it is merely a distraction from his other worries. Rather, Morrison’s greatest single boast – that he is the best economic manager on offer – is crumbling before his very eyes. Sure, the other imbroglios he’s facing, such as the multimillion-dollar sports rorts scandal, aren’t helping. In fact, every session of the senate inquiry is gnawing at his credibility. As is the dodginess of his Energy minister, Angus Taylor, which keeps bubbling to the surface, as it did in the New South Wales parliament estimates hearing this week.

But the No.1 priority is getting Australians to identify with Morrison as our true leader, in the face of what he told a business audience on Tuesday is a global health crisis that “will also have very real and very significant economic impacts, potentially greater than the global financial crisis”. He said this is “one of those national interest moments”. This was a prime minister striving to sound almost Churchillian in his appeal to the captains of industry facing a blitzkrieg of airborne virus droplets targeting their workers and, crucially, millions of workers and consumers in China, who make most of the things we buy from many of the things we sell them.

There was something “Captain Australia” about it when Morrison pleaded “we need your perseverance, your planning, your enterprise. We need your common sense, we need your calm, we need your commitment. But we need your patriotism as well.” That patriotism seems to involve companies risking putting themselves out of business by keeping their workers employed even if there is nothing for them to do and no money coming through the door to pay them. Morrison did say the government would play its part. But many in the room wondered how big a part and for how long.

Last year Morrison contorted his tenses during the 2019 election campaign to assure voters he had “already delivered a budget surplus next year”. The summer’s catastrophic bushfires closely followed by coronavirus have put paid to that.

Curiously Morrison claims his superior economic management has put Australia in one of the best positions of any developed country to meet the crisis. That may be true but it’s not really saying all that much unless Morrison is prepared to go deeper into debt than he has previously been willing to consider. The OECD certainly believes Australia is well positioned to go into deficit to stave off a recession, or at the very least lessen its impact and duration.

Here, ironically, the prime minister could take another leaf out of President Donald Trump’s book – besides defining reality in his own terms. Debt is certainly not a dirty word to the United States president. His budget deficit is now topping a trillion dollars. And this week Trump is promising even more spending in light of the buffeting the virus is giving the American economy and the danger signals coming from the volatility on world sharemarkets.

There have been various estimates from the Reserve Bank and Treasury of the impact the fires and the virus have had on the economy. The half-apercentage-point hit to the March quarter is thought by many economists to be optimistic. ANZ Bank is predicting negative growth for the March and June quarters, tipping Australia into recession. A rule of thumb is a 50-basis-point drop takes $10 billion off the economy a quarter as measured by gross domestic product. Economist Stephen Koukoulas says to avoid a recession the government would need to “splash”

$20 billion at the economy. Koukoulas, like others, however, believes the hit to the March quarter is closer to 1 percentage point.

On Thursday the government hedged its bets, producing a $17.6 billion stimulus with immediate effect. It’s not enough to head off a recession by the Koukoulas calculus but it’s a serious start.

This is probably why former treasurer Peter Costello, who is also chair of the $170 billion Future Fund, believes the Morrison government may need a second round of stimulus in the May budget. He is confident the sharemarket will bounce back once the virus passes, but that could be 18 months away, with things getting worse before that.

Morrison tries to make a virtue of his failure to act more decisively earlier. He said it’s about being levelheaded and learning from the mistakes of the Rudd government during the GFC. So there will be no new programs, and relief will be one-off and not “baked in” to the budget beyond the crisis. It sounds assuring for him and others beloved of fiscal conservatism, but he, like Rudd, is hostage to events he cannot control. He can only react to them, and the boldness of that reaction will be the test. Labor spent $52 billion in stimulus measures in the GFC. A second round, if it is required, as Costello muses, could see the Morrison government come close, unless he continues to put political campaigning ahead of governing.

China played a big role in Australia weathering the GFC with its increasing demand for our commodities, especially coal and iron ore. The irony this time is that our giant customer is also the genesis of the crisis.

But, after a roundtable with Industry Minister Karen Andrews, the Council of Small Business Organisations Australia chief executive, Peter Strong, was taking heart that there were signs the virus was abating in China.

He, like many, is hoping the worst could be over in three months, with supply chains by then functioning more normally. He was impressed that the minister seemed to be listening to the sector’s concerns but was disappointed the call for the Newstart unemployment benefit to be permanently raised by $90 a week, in order to immediately stimulate the retail sector, was ignored. Strong was appeased when the unemployed were included in the one-off cash handout of $750.

Morrison had better hope his stimulus and response to the virus works. The double whammy of a recession and a budget deficit that failed to work would be close to ignominious for him. Some on the backbench think no matter what he and the treasurer throw at the crisis, they can’t avert it. Morrison is hoping voters will accept none of it is his fault. That’s a courtesy the Liberals have not shown Labor over the past decade. Indeed, the taunts reached a crescendo after the delivery of last year’s “back in the black” budget surplus.

Labor has been at pains to appear “constructive” in its approach to the coronavirus. Privately it can’t believe how inept the government has been. It has taken five weeks to get really serious. Last weekend Anthony Albanese and his Health spokesman, Chris Bowen, wrote to Morrison and Health Minister Greg Hunt with 18 points for the government’s consideration. Their suggestions were politely dismissed by the prime minister only to be adopted in great part in the big announcements this week.

Bowen waited until Tuesday to give voice to some of the key points that had been made. A government that had a political advertisement ready the day it announced its bushfire measures still had not come up with a public information campaign. The shadow minister called for GPs to be given more support and advice. Bowen said, “There needs to be a more broad-based information campaign.” You can’t help thinking that if there were one on radio, TV and social media some of the irrational panic buying of toilet rolls may have been avoided. Health Minister Hunt responded by announcing a $30 million advertising campaign but that wasn’t due to begin until this weekend. On Wednesday Morrison and Hunt unveiled a $2.4 billion health package.

Bowen said the package fell short of “the response required urgently to prepare and respond to the crisis, leaving gaps in resourcing for primary care” and vulnerable populations more exposed. He said pop-up clinics will take six weeks to establish – hardly a rapid response to the hundreds lining up at hospitals for coronavirus testing.

Meanwhile, there is mounting evidence of the role Morrison’s office played in the allocation of $100 million in sports grants in exchange for vote-buying at the election. The senate inquiry heard evidence that then Sport minister Bridget McKenzie’s interference in the grants scheme was unlawful. McKenzie has denied any personal knowledge of late changes to sports grants after her signoff a couple of weeks before the election. And midweek Morrison brushed it all off when he was asked about it at one of his coronavirus news conferences.

Morrison is too busy urging voters to stay calm about their health while at the same time making sure

• they know it is under threat.

MORRISON HAD BETTER HOPE HIS STIMULUS AND RESPONSE TO THE VIRUS WORKS. THE DOUBLE WHAMMY OF A RECESSION AND A BUDGET DEFICIT THAT FAILED TO

WORK WOULD BE CLOSE TO IGNOMINIOUS FOR HIM.