Invest
‘Right size, wrong shape’ stimulus package
The announcement of the Morrison government’s $17 billion stimulus has been met with some criticism as a think tank labeled it “the right size, but the wrong shape”.
‘Right size, wrong shape’ stimulus package
The announcement of the Morrison government’s $17 billion stimulus has been met with some criticism as a think tank labeled it “the right size, but the wrong shape”.
According to The Australian Institute, the package is the “right size initial response, but the shape is wrong”, with the most effective form of stimulus making up less than a quarter of the total package.
The Australian Institute senior economist Matt Grudnoff believes the cash splash should have been focused at consumers instead of businesses.
“The Prime Minister asserted $3 in every $4 dollars of stimulus would go to business – it should be the other way round. Common sense and recent history tells us that businesses don’t spend when their sales are falling.”
“The best way to help Australian businesses right now is to get cash through the cash registers. Businesses with plenty of customers don’t lay off staff.”
“The most effective part of the package is the $750 to welfare recipients. We know people living on the brink spend any extra money they receive on essentials, and this will support demand in the economy,” Mr Grudnoff said.
While The Australian Institute has questioned the stimulus package, KPMG’s chief economist Dr Bendan Rynne has praised the stimulus package.
“KPMG believes that the government stimulus package was comprehensive, well targeted and represented a circuit-breaker to ensure that Australia does not descend into a more acute and protracted economic downturn due to businesses and households losing confidence,” Dr Rynne said.
The firm estimates that, assuming it is implemented in an optimal and efficient manner, it could add slightly over $20 billion to GDP in the next two years.
The consulting firms suggests there are two caveats to this – first, in order for the “Delivering support for business investment” components of the stimulus package to be implemented and successful, small-to-medium businesses will need to invest slightly more than $30 billion in the Australian economy over the next two years. This is a significant ask, especially in an uncertain domestic and global business environment.
Second, the impacts of the COVID-19 pandemic are unfolding in real time. If the pandemic turns out to be more acute and lasts longer than is currently anticipated, then the economic impacts may be significantly greater.
Overall, KPMG believes the economic impact will largely depend on consumer behaviour, which could be both a larger and prolonged risk than their modelling entalis.
“Despite evidence of households engaging in stockpiling behaviour that appears irrational and the recent heavy falls in financial markets, we believe the probability of the pandemic resulting in a full-blown panic scenario remains low.
“We anticipate governments have an opportunity to implement a range of policies that can assist with reducing uncertainty and minimise the chances of such a scenario materialising, as the Australian, US and UK governments did last week,” Dr Rynne concluded.
nestegg has previously reported the Coalition government's stimulus package.
About the author
About the author
Economy
5 predictions for the Australian economy in 2021
The Australian economy is tipped to be one of five nations to outshine, with a win on the health front likely to act as tailwind, a new report has revealed. ...Read more
Economy
Deloitte calls vaccine a ‘game changer’ as 77% of Aussies welcome jab
As many as three-quarters of Aussies are willing to be vaccinated once a new coronavirus vaccine becomes publicly available, new research has revealed, as Deloitte Access Economics calls the vaccine ...Read more
Economy
Markets react to Biden’s stimulus package
The US markets have reacted negatively to President-elect Joe Biden’s US$1.9 trillion ($2.44 trillion) bailout proposal, amid mass job losses as the US continues to struggle with the COVID-19 pandem...Read more
Economy
‘Aussies to keep economy ticking with $200bn in savings’
The government is counting on Aussies to use their savings to drive economic recovery once temporary support measures are wound back at the end of March. ...Read more
Economy
Business improves but COVID threat remains
The Australian economy continues to show signs of life, with businesses’ payment times improving despite recent outbreaks of COVID-19, new research has revealed. ...Read more
Economy
10 impacts the US ‘blue wave’ will have on investors
With the US Senate run-off falling to the Democrats, a new blue wave is spurring optimism for investors, a chief strategist has said. ...Read more
Economy
Frydenberg confident vaccine rollout will boost the economy
The economy and the budget are expected to reap the benefits of the earlier than planned vaccine rollout, following a series of unexpected lockdowns which have already put a dent on the government’s...Read more
Economy
Australian economy back to pre-COVID levels by 2021
The Australian economy is expected to bounce back to pre-COVID levels by the end of 2021 as wins on the health front and aggressive government policy have limited damage while boosting business and co...Read more
Economy
5 predictions for the Australian economy in 2021
The Australian economy is tipped to be one of five nations to outshine, with a win on the health front likely to act as tailwind, a new report has revealed. ...Read more
Economy
Deloitte calls vaccine a ‘game changer’ as 77% of Aussies welcome jab
As many as three-quarters of Aussies are willing to be vaccinated once a new coronavirus vaccine becomes publicly available, new research has revealed, as Deloitte Access Economics calls the vaccine ...Read more
Economy
Markets react to Biden’s stimulus package
The US markets have reacted negatively to President-elect Joe Biden’s US$1.9 trillion ($2.44 trillion) bailout proposal, amid mass job losses as the US continues to struggle with the COVID-19 pandem...Read more
Economy
‘Aussies to keep economy ticking with $200bn in savings’
The government is counting on Aussies to use their savings to drive economic recovery once temporary support measures are wound back at the end of March. ...Read more
Economy
Business improves but COVID threat remains
The Australian economy continues to show signs of life, with businesses’ payment times improving despite recent outbreaks of COVID-19, new research has revealed. ...Read more
Economy
10 impacts the US ‘blue wave’ will have on investors
With the US Senate run-off falling to the Democrats, a new blue wave is spurring optimism for investors, a chief strategist has said. ...Read more
Economy
Frydenberg confident vaccine rollout will boost the economy
The economy and the budget are expected to reap the benefits of the earlier than planned vaccine rollout, following a series of unexpected lockdowns which have already put a dent on the government’s...Read more
Economy
Australian economy back to pre-COVID levels by 2021
The Australian economy is expected to bounce back to pre-COVID levels by the end of 2021 as wins on the health front and aggressive government policy have limited damage while boosting business and co...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
