While the government’s historic $1,500 fortnightly JobKeeper payment is expected to support millions of Aussie jobs, the Treasury is expecting the unemployment rate to rise to 10 per cent in the June quarter, doubling from just 5.1 per cent in the most recent data.
However, according to Treasurer Josh Frydenberg, government projections show that in the absence of the $130 billion JobKeeper payment, the unemployment rate would be 5 percentage points higher and would peak at around 15 per cent.
Stressing that the economic shock facing the global economy from the coronavirus is far more significant than what was seen during the global financial crisis, Mr Frydenberg said that the government support, which now stands at $320 billion or 16.4 per cent of the GDP, is “proportionate to the challenge we face”.
“Businesses across a range of industries have had to close their doors and others have seen a significant drop in activity as countries, including Australia, exercise social distancing measures to contain the spread of the virus,” Mr Frydenberg said.
“More than 800,000 businesses have already registered for the JobKeeper payment which will allow the economy to recover more quickly once we are through to the other side of the crisis.”
The Treasurer assured that the economic support will ensure Australia bounces back stronger on the other side, without undermining the structural integrity of the budget.
Australia’s financial position was recognised last week by Standard & Poor’s, who reaffirmed its AAA credit rating and made the point that “while fiscal stimulus measures will soften the blow presented by the COVID-19 outbreak and weigh heavily on public finances in the immediate future, they won’t structurally weaken Australia’s fiscal position”.
The Treasurer said: “Australia is one of only 10 countries to hold such a rating from all three major rating agencies.
“Every arm of government and industry is working to keep Australians in jobs and businesses in business, and to build a bridge to recovery on the other side.”
Easing access to working capital
Late last week, the Treasurer also announced the rollout of the first round of offers to banks and non-bank lenders under the Coronavirus SME Guarantee Scheme, which aims to ease access to working capital for Aussie SMEs.
The government earlier said it will support up to $40 billion of lending to SMEs with turnover of less than $50 million, including sole traders and not-for-profit organisations, and will guarantee 50 per cent of new loans issued by eligible lenders until 30 September 2020.
The Treasurer confirmed that the government will make offers to 29 banks and five non-bank lenders in response to expressions of interest which will total $34 billion of potential lending to SMEs.
“The scheme will also support the JobKeeper program to help businesses get access to the necessary working capital to continue operating when their revenues have been significantly impacted by the coronavirus,” the Treasurer said on Thursday.
This scheme follows an earlier announced $15 billion to allow AOFM to invest in wholesale funding markets used by small ADIs and non-ADI lenders. Additionally, the Reserve Bank has pledged a $90 billion term funding facility for ADIs, with a priority for SME lending.