Moneytech Fiscal Stimulus Packages Update

Fiscal Stimulus Packages

Fiscal Stimulus Packages

As the coronavirus pandemic continues to grow across the globe, many central banks have cut their policy interest rates to near zero in an attempt to protect their domestic economies. To support their endeavour, governments around the world are implementing fiscal stimulus packages to alleviate the economic damage incurred by the virus. These have generally aimed to provide financial support to individuals and businesses as the lockdown of countries place significant pressure on rising unemployment statistics.

Australia Stimulus Package

On the 22nd of  March 2020, the Commonwealth Government announced the second stage of the economic stimulus package worth a total of AUD $189 billion[i] to be injected into the struggling domestic economy. The economic stimulus package will be split into three key aspects; support of workers and households, assistance to businesses to keep staff in the workforce and regulatory protection and financial support for companies[1] The package will provide up to $100,000 to eligible small and medium sized enterprises (SME) that employ staff, with a minimum payment of $20,000 i . These payments will aim to stabilise and support businesses so they can maintain operations, pay their expenses and retain staff.

The threshold for businesses with turnover up to $500 million, up from $50 million, can now immediately write off any asset with a value of up to $150,000 purchased before 30 June 2020 i  .  This threshold has been increased from $30,000 [2].

What does the asset write off mean for your business?

Simply it means that businesses can now invest in assets and get the immediate tax advantage rather than depreciating the asset over a number of years.

In addition to the other components of the stimulus packages, this provides a great advantage for many businesses.

Analysts are optimistic over the impact of the emergency stimulus package – worth almost 10% of the Australia’s GDP – and whether the stimulus will provide enough support to the SME market which makes up 68% of Australian businesses[ii].  KPMG Australia Chief Economist Brendan Rynne has described the stimulus as a positive and sensible approach as the Federal government aims to add the fiscal firepower needed to withstand the pandemic outbreak ii.

US Stimulus Package

The US is currently in the final stages of a momentous USD $2 trillion economic stimulus package aimed to support the pandemic-hit domestic economy which is expected to shrink at annualised rate of 24% in the Q2 of 2020[iii]. The economic stimulus package will include an unparalleled injection of loans, tax breaks and direct payments for businesses and taxpayers with $500 billion of the package directed to maintaining support for companies to retain employment throughout the pandemic[iv].

The $2 trillion is expected to be finalised by the Members of the House over the weekend after being unanimously passed by the Senate democrats and republicans 63-0 [Reference]. President Donald Trump has praised the stimulus deal[v] and believes that the economy will restart over the coming month with Ethics and Public Policy Centre Henry Olsen remaining optimistic over the impact of the fiscal strategy with results expected to be seen in the domestic economy by June[vi].

i Pm.gov.au. 2020. Supporting Australian Workers And Business | Prime Minister Of Australia. [online] Available at: <https://www.pm.gov.au/media/supporting-australian-workers-and-business> [Accessed 27 March 2020].

ii Grant Wardell-Johnson, D., 2020. Federal Government Second Economic Response Package. [online] KPMG. Available at: <https://home.kpmg/au/en/home/insights/2020/03/budget-2020-federal-government-fiscal-stimulus-package-covid-19.html> [Accessed 27 March 2020].

iii Hebron, J., 2020. U.S. ECONOMY TO SHRINK 24% FROM APRIL To JUNE 2020: Goldman Sachs.

[online]

The Basis Point. Available at: <https://thebasispoint.com/u-s-economic-growth-to-shrink-24-april-to-june-2020-goldman-sachs/> [Accessed 27 March 2020].

iv . staff, C.N.N. (n.d.). What’s in the $2 trillion coronavirus stimulus bill.

[online]

CNN. Available at: https://edition.cnn.com/2020/03/25/politics/stimulus-package-details-coronavirus/index.html [Accessed 27 Mar. 2020].

v Mammoth US coronavirus bill passes Senate. (2020). BBC News. [online] 26 Mar. Available at: https://www.bbc.com/news/world-us-canada-52033863 [Accessed 27 Mar. 2020].

vi Smith, D. (2020). Will the coronavirus crisis spell triumph or disaster for Donald Trump? The Guardian. [online] 26 Mar. Available at: https://www.theguardian.com/us-news/2020/mar/26/coronavirus-donald-trump-triumph-or-disaster.



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