Dr Brendan Rynne, KPMG Chief Economist, responds to second Federal Government stimulus package
Today’s economic support package has to be seen very much as part of an overall suite of measures announced in recent days by the Federal Government, RBA, state governments, and the banks.
It allows affected businesses and individuals to access public and private funding mechanisms if they need it to get across the bridge to the end of the crisis. It is a combination of cash handouts, concessional loans and regulatory relief.
Today’s package is nuanced in its approach as it needs to be considered in combination with the suite of support measures already announced, and importantly it is designed to enable businesses to self-determine the support they need – whether it be cash flow support from government or private sector funding support from banks – over the period of this crisis.
The government’s main focus at the moment appears to be to strengthen the safety net designed to help individuals and families impacted by the Coronavirus, while also minimising the number of people that need to access that safety net. This is by focusing on helping businesses survive as intact as possible – staying connected with their workforces and supply chains. The focus is on helping businesses help themselves
This is a positive strategy that indicates that the government has not given up on the possibility that a large portion of the business sector can cross the metaphorical bridge in reasonable shape, ready to ramp up operations once the focus shifts to recovery
This combination of private and public support mechanisms means good business decision-making is still very much needed.
The design of the combined packages ensure business support measures dovetail into the social support mechanism. Such an approach means the packages promote individual responsibility and are clearly designed to enable businesses to determine what type of support best meets their own requirements.
Policy measures have balanced providing opportunities for individuals and businesses to borrow from their future, through superannuation and concessional loans, and direct assistance from the government through cash transfers.
The support mechanisms developed by the government are temporary, scalable and flexible, and seek to be proportionate in the event additional fiscal firepower is needed in the future.
This is a sensible approach as it may be that the ‘government’s bridge to the other side’ will need to be widened in the coming weeks as additional support measures are necessary.