Morrison government to inject extra $66bn in measures to save jobs during coronavirus crisis

SIMON BENSON

MARCH 22, 2020

The Australian

Small businesses will be given wage subsidies of up to $100,000 each to keep staff on and offered access to a further $20 billion in government guaranteed unsecured loans capped at $250,000 each in the second phase of the economic response to COVID-19.

In lifting stimulus measures to $189 billion, the Morrison government also allocated an estimated $20 billion for income support for workers and further small business subsidies.

Prime Minister Scott Morrison has warned that “a lot of pain” was coming as the COVID-19 crisis deepened — and he will today unveil another $66 billion in measures to prop up struggling companies and their workers.

The scaled-up relief package for businesses to keep workers in jobs takes the total fiscal response already to almost 10 per cent of GDP — more than double that rolled out by similar economies such as Canada and South Korea.

Warning that many firms will not survive the crisis, the government will also flag a third round of economic measures in the weeks and months to come.

The key planks of the second round package to be announced today will establish the Coronavirus SME Guarantee Scheme which will see the government underwrite $20 billion worth of loans as a 50 per cent guarantee to support lending of up to $40 billion to SMEs from bank and non-bank lenders.

This will apply to eligible loans for businesses with annual turnovers of up to $50 million and will include an upfront six month freeze on repayments.

The loans will be unsecured but used only for working capital purposes and will apply to loans granted within six months from April 1, 2020. New and existing bank customers will be able to apply for loans up to $250,000 over three years.

A new wage subsidy will also see almost 700,000 small and medium-sized businesses with annual turnovers of up to $50 million and employing 7.8 million people eligible for the new wage subsidy worth $25 billion in total.

It will be paid in the form of cash payments equivalent to 100 per cent of the withholding tax reported by a business over two quarters (six months) with a maximum cash boost of $100,000.

This significantly ramps up the measures announced two weeks ago in the first stimulus package which had a ceiling of $25,000 per business worth $6.7 billion.

Under the enhanced scheme, firms with no withholding tax obligations will now receive a minimum payment of $20,000.

It has also been broadened to include eligible not-for-profit charities.

“We want to help businesses keep going as best they can or to pause instead of falling apart. We want to ensure that when this crisis has passed Australia can bounce back,” the Prime Minister said.

“There is a lot of pain coming but we’re going to cushion the blow as best we can.

“In the event that someone does regrettably lose their job because of the coronavirus it’s very important that business give their workers the confidence that this is just temporary. And that when they reopen their doors and get back to business that they will want to get them back on the payroll as soon as possible.

“We’re already seeing the devastating economic impact coronavirus is having for Australia’s local businesses. Unfortunately it is going to get worse before it gets better but it will get better.

“Australia’s small and medium businesses are the engine room of our economy. When they hurt, we all hurt.”

— Prime Minister Scott Morrison

“The plan we’re rolling out is focused on building a bridge for as many of those businesses and their workers as we can to get them over this crisis. That means supporting wages for small businesses so they don’t need to let go of their staff and ensuring that during the crisis small businesses know we have their backs on their bank loans.

“Many of our restaurants and bars, our hotels and tourism operators, our hairdressers and beauty salons and our events companies are already feeling the brunt of the economic impact of coronavirus. This is about finding a way for them and their workers to build a bridge to the other side of this crisis.

“The next few months are going to be a difficult journey but we all have a role to play to adapt to the changes we’re facing, to cushion the impact of what is happening and to pull together so we can bounce back when we get to the other side.”

The total economic stimulus and relief committed already amounts to $189 billion and includes $17.6 billion announced in the first round and the $105 billion worth of measures announced last Friday by the Reserve Bank and the government to inject liquidity into the system.

The banks last week also announced $8 billion worth of their own measures to help small business customers, including a six-month deferral of loan repayments

Yesterday’s announcement by the banks to defer loan payments for 6 months for Australian small businesses due to the impacts of #coronavirus is a game changer.

This is one important part of our efforts with industry & states to build a bridge to recovery.

Treasurer Josh Frydenberg said the government’s focus was squarely on saving jobs.

“These are extraordinary times requiring extraordinary measures but Australians can be reassured that their government is working day and night to protect their health, wellbeing and livelihoods,” Mr Frydenberg said.

“These measures build on what we have already announced to cushion the blow until we get to the other side of this global health crisis.

“Our focus remains on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly.”

CORONAVIRUS STIMULUS MEASURES

• Total economic relief package (stage one and stage 2) so far — $189 billion.

• Includes measured announced to date equivalent of 9.7% of Australia’s GDP.

• $189bn includes $17.6bn announced in the first stage of measures, as well as the $105 billion worth of measures the RBA and the government announced last Friday.

• Comparing the stimulus packages of other countries — Canada’s is 4.5% of GDP; Hong Kong is 4.5% of GDP; South Korea is 4% of GDP.

NEW MEASURES TO BE ANNOUNCED TODAY

• Wage subsidy — cash payment of up to $100,000 for SMEs with annual turnover of up to $50 million (cost $25.2 billion).

• Morrison government to provide a 50 per cent bank guarantee for up to $40 billion in new loans of up to $250,000 each to SMEs (potential cost to government $20 billion).

• A further $20 billion for income support measures and other small business measures.

CORONAVIRUS SME GUARANTEE SCHEME

• Commonwealth will guarantee 50 per cent through the participating banks of an eligible loan to small and medium enterprise customers that have been impacted by the coronavirus.

• The scheme will have the capacity to support lending of $40 billion to SMEs. SMEs that have less than $50m turnover per year will be eligible under the scheme.

• Loans will be used for working capital purposes and be will unsecured, for loans granted within six months from April 1, 2020.

• The scheme will apply to new or existing customers of banks and non-bank lenders.

• Lenders will not be charged a fee for accessing the scheme. It will be repayment-free for six months. The maximum loan will be $250,000 for a term up to three years.

• It will not apply to refinancing of customers who already have existing loans that will benefit from the ABA announcement.

• Through this measure, the government is offering to guarantee $20 billion.

WAGE SUBSIDY

• Cash payment of up to $100,000 will be worth 100% of the tax those small businesses are withholding from their employee’s salary and wages. The payment will be tax free.

• The wage subsidy is open to businesses with turnover under $50 million and will now also be available to eligible not-for-profit charities.

• Number of workers that the government hopes will benefit from the wage subsidy (approximately): NSW 2.5 million people, Victoria 2 million people, Queensland 1.5 million people, Western Australia 810,000 people, South Australia 480,000 people, Tasmania 155,000 people, Northern Territory 63,000 people, ACT 115,000 people.

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