Australia pumps in extra stimulus to support the economy – UOB

Economist at UOB Group Lee Sue Ann reviewed the recent fiscal measures announced by the Australian government.

Key Quotes

“Australia PM Scott Morrison’s conservative government, on Tuesday (6 October), unleashed further emergency stimulus to prop up economic growth, backpedalling on a previous promise to return the budget to surplus. The 2020/21 Budget brings the Government's overall support to A$507bn, including A$257bn in direct economic support.”

“Australia delayed the release of this year’s federal budget, which usually takes place in May, as the COVID-19 pandemic upended most of the economic assumptions underlying its projections… The latest measures are forecast to push the budget deficit out to a record A$213.7bn (around 11% of GDP) after a deficit of A$85bn in 2019/20.”

“The government’s highly expansionary budget came shortly after the Reserve Bank of Australia (RBA)’s policy decision on Tuesday, at which it kept interest rates at a record-low and flagged reducing high unemployment rate as a national priority. Further monetary expansion is likely, but we think the impact will be modest. Nonetheless, the policy imperative in the face of the current economic backdrop is to be bold – erring on the side of doing more, rather than doing less.”