Jury out on Govt stimulus success: VanEck
The “jury is out” over how successful the investment impact of the Federal Government’s stimulus package will be to the economy, according to VanEck.
The Government had made several stimulus measures consisting of a variety of lending, guarantees, Reserve Bank of Australia (RBA) liquidity and the $130 billion JobKeeper and JobSeeker programmes, wage subsidies for apprentices and Pay As You Go relief measures.
The COVID-19 epidemic had affected Australia just weeks after the bushfires which dented the economy thanks to a severe reduction in tourism.
“[Treasury] swallowed their pride to include a one-off cash splash for pensioners and welfare recipients. The money will be quickly spent,” VanEck said.
“The economic response to the packages is a bit harder to read. Investment incentives are unlikely to be utilised in the near term because uncertainty and falling consumer demand will dominate investment business cases until the outlook clears.
“Cash boosts to heavily-affected regions and industries are more about preserving businesses from collapse rather than promoting growth. The jury is out on how successful this will be. But it certainly can’t hurt; and while chunks of the economy are virtually in lockdown there’s little other help available.”
Meanwhile, the adverse impact on two of Australia’s major sectors of education and tourism would hit Australia’s future gross domestic product.
“Last year, mining problems in Brazil boosted Australian exports and national income. This year, bushfires, COVID-19 and the oil shock will do the opposite,” the manager said.
“Education and tourism are two of Australia’s biggest export. Both have been adversely impacted by bushfires and COVID-19. As shutdowns spread and employment and business survival gets hit, estimates of the possible short-term cost to GDP are soaring, with 10% declines possible.”
AUTHOR
Laura Dew
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