Invest
‘Overstated stimulus’ won’t cushion economic blow
The economic impact of the coronavirus outbreak will only be “partly offset” by the recent injection of fiscal stimulus, according to ANZ Research.
‘Overstated stimulus’ won’t cushion economic blow
The economic impact of the coronavirus outbreak will only be “partly offset” by the recent injection of fiscal stimulus, according to ANZ Research.

Earlier this week, Prime Minister Scott Morrison announced an additional $66.1 billion in fiscal support for businesses, casual workers, sole traders, retirees and welfare recipients in response to the economic shock caused by the coronavirus pandemic.
This builds on the government’s first round of stimulus, totaling $17.6 billion as well as the provision of up to $15 billion in funding to support lending to consumers and businesses, and the Reserve Bank of Australia’s (RBA) $90-billion TFF for the supply of low-cost credit.
However, according to ANZ Research, the fiscal support would not be enough to cushion the economic blow dealt by the virus.
In an analysis, ANZ Research senior economists Cherelle Murphy and Catherine Birch said the stimulus, which they said could create a budget deficit of at least $30 billion in 2019-20, would make an “important difference” but would not “offset the economic consequences of the pandemic”.

“We maintain expectations of a mid-2020 recession,” the economists stated.
“The risk is that it could be deeper and longer than currently anticipated as shutdowns and border closures push economic growth down another notch.”
According to their analysis, the federal government’s direct fiscal spending totals $27.5 billion (5.6 per cent of GDP) in the second quarter of the financial year (2Q20) and $37.6 billion (7.4 per cent of GDP) in 3Q20. This is in addition to state government support totaling $2.6 billion (0.5 per cent of GDP) in 2Q20 and $3.0 billion in Q3 (0.6 per cent of GDP).
The economists acknowledged that while the support is “material and unprecedented”, the real benefit to the economy is “overstated”.
“This response is to be commended,” the economists noted. “In our view, though, the $188.8 billion figure used by the federal government to describe its fiscal and balance sheet package is vastly overstated.”
The analysts continued: “This is a material exaggeration, as it counts the provision of lower-cost credit at face value.
“It is only the reduction in the cost of this credit that should count as stimulus. Even this much lower figure may overstate the amount of stimulus as business may not chose to access it.”
ANZ Research previously forecasts that subdued economic activity would likely trigger a sharp increase in the unemployment rate (currently 5.1 per cent), which the group said could hit 7.8 per cent by year’s end.
About the author

About the author


Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more

Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more

Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more

Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more

Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more

Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more

Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more

Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more

Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more

Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more

Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more

Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more

Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more

Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more

Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more

Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more