Treasurer Josh Frydenberg has been holding emergency discussions with senior officials from the Reserve Bank and Treasury, and top officials from the country’s big banks in a bold effort to stave off bankruptcy for hundreds of thousands of businesses that are seeing their cash flows dry up as a result of the coronavirus shutdown.
People close to the talks say Frydenberg is working hard to come up with a workable scheme that will ensure that businesses and workers continue to receive income to tide them through an extended period of economic shutdown.
Economists estimate that economic activity could plunge about 10 per cent, as happened in China when Beijing’s efforts to contain the spread of the coronavirus brought the country to a standstill. Official figures released this week show that Chinese industrial production fell 13.5 per cent in the first two months of the year, compared with the same period in 2019, and retail sales plunged 20.5 per cent.
Canberra is acutely aware that a similar drop in Australia’s economic activity would result in huge numbers of viable businesses tipping over into bankruptcy, pushing the unemployment rate sharply higher.
That would leave a permanent scar on the economy, and greatly hinder its ability to bounce back when the coronavirus epidemic subsides. …
People close to the talks point out that the administrative difficulty of setting up such a scheme is daunting, particularly since Frydenberg is keen to ensure that any government financial assistance is restricted to businesses that continue to support their workers during the economic shutdown.
What’s more, the cost of the scheme will dwarf the Morrison government’s $17.6 billion stimulus package, which was announced less than a week ago in an attempt to cushion the impact of the coronavirus recession.