Recession fears linger despite stimulus

Economists maintain a recession is still possible despite the federal government's $17.6 billion economic stimulus package.

Prime Minister Scott Morrison announced the funding on Thursday as part of efforts to help the economy weather the impacts of the coronavirus outbreak.

The measures include giving 6.5 million welfare recipients and pensioners a $750 payment, and automatic grants for small and medium-sized businesses of between $2,000 and $25,000.

AMP Capital senior economist Diana Mousina said the measures were decent, but predicted they would not be enough.

"The key question is - will this stimulus be enough to ward off an Australian recession. We think no," she said.

Fewer Chinese tourists and students, along with damage from the summer bushfires, would hurt a weak economy, she said.

Commsec chief economist Craig James said the stimulus was a good first step but would not super-charge the economy.

"Neither does it guarantee that the economy won't slip into recession," he said.

Business leaders were upbeat about the stimulus.

Australian Retailers Association executive director Russell Zimmerman was confident the cheque recipients would spend, rather than save, the money.

"I believe these are people living week to week and can't afford the simple things in life, like clothing and footwear," he said.

"Our view is that money will get spent in the retail industry."

Australian Industry Group chief executive Innes Willox had a similar view.

He said recipients may put some of the money aside, but expected they would spend and help sales.

Mr Willox was mostly happy with the stimulus and said it would reduce the risk of a more severe downturn.

However he wanted more payroll tax relief for larger employers.

Australian Investment Council chief executive Yasser El-Ansary said the payment to welfare recipients and pensioners was the right policy approach.

He was pleased by the measures, but said more help was needed for industry to innovate and grow.

Mr Zimmerman was also optimistic about measures aimed at preventing employers laying off apprentices.

Small businesses will get up to $7000 each quarter for apprentices as a wage subsidy.

Mr Zimmerman said some employers have seen a downturn in trade, and he was concerned they retained staff.

"Our concern is they keep their employees, particularly small business," he said.

The stimulus failed to lift the share market on Thursday, which slumped by as much as 7.16 per cent at 1310 AEDT.

At its nadir, more than 26 per cent had been wiped from the benchmark ASX/200 since it hit an all-time high just three weeks ago.

The wider stock market has shed more than $640 billion during that time.

Ernst & Young chief economist Jo Masters said while many of the stimulus measures are automatic, and do not require people to apply, the effects would take time.

"It takes time for spending to feed through the economy," she said.

Meanwhile, the government will also spend $700 million over four years to expand the instant asset write-off for businesses.

The threshold will be raised from $30,000 to $150,000 and expand access to businesses with an annual turnover of up to $500 million, from $50 million previously.

A $1 billion regional assistance fund is aimed at supporting the tourism industry.

The government on Wednesday announced health measures worth $2.4 billion to deal with the virus.

Austrlaian Associated PressBack to Breaking News

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