RUBY:

From Schwartz Media I’m Ruby Jones this is 7am.

The economic and social impacts of the coronavirus outbreak are accelerating.

The World Health Organisation has officially declared the virus a pandemic.

Governments around the world reacted quickly, with US President Donald Trump announcing a ban on all travel to the United States from Europe.

India has shut down its borders for a month… with all tourist visas suspended.

And in Australia the government finally released the details of a stimulus package worth more than 17 billion dollars, designed to stave off a recession.

Today, columnist for The Saturday Paper Paul Bongiorno on whether the government’s actions will be enough to see us through this crisis.

Paul. Paul. Welcome!

PAUL:

Face to face! Nowhere to hide.

RUBY:

Welcome to 7am, it's lovely to have you here in person.

PAUL:

And it's wonderful to be here.

RUBY:

Paul just a week ago, Scott Morrison was saying absolutely not to a significant stimulus. So what's changed?

PAUL:

Well, that's right. Ruby. Scott Morrison had previously ruled out any kind of significant stimulus. It looked like and was beginning to sound like he was still prioritizing his budget surplus.

Archival Tape -- Scott Morrison:

“You know, last time there were these big stimulus packages in Australia, you know people had pink batt programs and all these sorts of things, and some of those were terrible, terrible failures which cost taxpayers a huge amount of money and didn't do anything for the economy.”

PAUL:

Morrison told us he wasn't keen to act.

Archival Tape -- Scott Morrison:

“This isn't like the Global Financial Crisis. We haven't had the banks fall or fail. We have got a problem with financial stability or credit extensions.”

PAUL:

But, as the virus spread and the ASX recorded its worst performance since the global financial crisis in 2008.

Archival Tape -- Unidentified reporter:

“Economic anxiety has sent Australia hurtling towards a recession.”

Archival Tape -- Unidentified reporter:

“Wall St was in free fall overnight triggering the first automatic fifteen minute halt to trade in two decades.”

PAUL:

the government finally had no choice. They flagged a total 180 degree turn. And scrambled to come up with a plan which they finally released on Thursday this week.

Archival Tape -- Scott Morrison:

“The fiscal stimulus that would be necessary and is necessary to deal with the economic challenges that the country will face in the months ahead has been an important part of our plan for Australia to move through the challenges of the coronavirus in the months ahead.”

RUBY:

So, Paul, how is the federal government explaining this change from just a week ago, saying no to an extreme stimulus and now unveiling this plan that's worth over 17 billion dollars?

PAUL:

Well, I think the number one priority, Ruby, for the government is to get Australians to identify Scott Morrison as our true leader in the face of this crisis.

Morrison told a business audience on Tuesday that this isn't only a global health crisis, but one that he said would have very significant economic impacts…

Archival Tape -- Scott Morrison:

“...potentially greater than the global financial crisis, especially for Australia”

PAUL:

Morrison knew that to explain his hard pivot to being a champion of stimulus, he'd have to acknowledge the serious economic threats. And as someone who has criticised the Rudd government's stimulus package back in 2008, relentlessly criticised, in fact, he's now seeking to
make the current threat feel even worse.

Archival Tape -- Scott Morrison:

“The situation we face today is a health crisis that has moved quickly to weaken demand, disrupt supply chains, crunch cash flows, especially for small and medium sized businesses and especially in those sectors and locations most exposed and hardest hit.”

PAUL:

There was something, Captain Australia, about it, you know, when he pleaded to business.

You know, we need your perseverance, your planning, your enterprise...

Archival Tape -- Scott Morrison:

“...we need your common sense, we need your calm, we need your commitment, but we need your patriotism as well.”

PAUL:

Morrison tried to make a virtue of his failure to act more decisively earlier. He said it's about being level headed and learning from the mistakes of the Rudd government in the global financial crisis.

This sounds assuring for him and no doubt others beloved of fiscal conservatism. But he, like Rudd, is now hostage to events. He really can't control. He can only react to them. And the boldness of that reaction will be the test. It's taken five weeks for him to get really serious.

RUBY:

And so what has the federal government announced now?

PAUL:

Well, so Ruby, on Thursday, Morrison and Frydenberg unveiled their modest but substantial scalable cash splash of $15 billion dollars.

Archival Tape -- Scott Morrison:

“This plan is about keeping Australians in jobs. This plan is about keeping business in business, particularly small and medium sized businesses. “

PAUL:

And this is on top of the $2.4 billion they announced on Tuesday for emergency health measures. So all up the package is in the vicinity of seventeen point five billion dollars.

RUBY:

And what areas are being targeted in the package?

PAUL:

Well, businesses, large and small, for the simple reason they employ people. They're the engine room in many ways of the economy.

There'll be cash handouts of $25,000 per business, which amounts to a wage subsidy with a special emphasis on apprentices.

Then there's what's called an instant asset write off to encourage businesses to upgrade, to buy equipment and to add to demand in the economy.

But they will give a one off cash handout not only to the unemployed but also to pensioners.

So, Ruby, the big question here, though, is will this be enough to keep us sliding headlong into recession?

RUBY:

We’ll be back in a moment

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RUBY:

Paul, the federal government has unveiled an economic stimulus package and worth more than 17 billion dollars to try and boost the economy. Will it be enough?

PAUL:

Ruby, the thing to note is that Australia's economy hasn't exactly been healthy even before the Corona virus outbreak.

A sure fire indication of this in the past year. The Reserve Bank has had to drop interest rates three times to now being just one step away from zero.

This is 700 basis points lower than the so-called emergency levels at the time of the 2008/2009 global financial crisis.

And we've seen Treasury having to revise down growth and job forecasts in their budget updates.

Now the ANZ is predicting negative growth for the Australian economy in the March - that's the quarter we're now in, and then the next - quarter, the June quarter, which would tip us into recession.

RUBY:

So what would need to be done to avoid tipping into recession?

PAUL:

Economist Stephen Koukoulas says to avoid recession, the government would need to splash 20 billion dollars, which is 1% of the economy...

And another negative quarter would mean the government would have to spend closer to $40 billion to avoid recession.

This is probably why former treasurer Peter Costello, who is also the chair of the $170 billion Future Fund, believes the Morrison government may need a second round of stimulus in the May budget.

RUBY:

So, Paul, what happened the last time we saw a big stimulus plan? Did it help?

PAUL:

Well, the GFC saw Labor spend $52 billion in two rounds of stimulus measures.

A second round, if it is required, as Costello muses, could see the Morrison government come close unless the Prime Minister continues to put political campaigning ahead of governing.

China played a big role in Australia weathering the GFC with its increased demand for our commodities, especially coal and iron ore. But this time our giant customer is also the cause of the crisis.

And I spoke with Small Business Association CEO Peter Strong. He was taking heart after a roundtable with Industry Minister Karen Andrews and government advisers that there were signs that the virus was starting to abate in China.

He, like many, are hoping the worst could be over in three months with supply chains functioning more normally.

I must say, Peter was impressed that the minister seemed to be listening to the sector's concerns, but disappointed that the call for the Newstart unemployment benefit to be raised by $90 a week permanently was ignored because he says, like everyone else, that the immediate stimulus would be given to retailers and continue to be given.

The government is clearly hoping that its one off cash payments will do the same trick and Strong on Thursday welcomed the $25,000 business handout. He said they asked for 50.

RUBY:

Now that the government has announced its stimulus plan, is there a sense that we'll get through this?

PAUL:

Well, some on the government's backbench are pessimistic that no matter what Morrison and the Treasurer throw at the crisis they can't avert it. Morrison is hoping voters will accept that none of it is his fault.

But of course, while we are talking about stimulus and Coronavirus, Morrison would be relieved when not focusing on the mounting evidence of the role of his office in the $100 million distortion of sports grants for vote buying at the election.

The continuing Senate inquiry heard this week evidence of Minister McKenzies interference in the grants, while the former minister herself has denied any personal knowledge of late changes to sports grants after her sign off a couple of weeks before the election.

Well, Morrison brushed it all off when he was asked about it at one of his Coronavirus news conferences midweek.

Archival Tape -- Scott Morrison:

“Ministerial authority for the program is with the Minister for Sport. That...that is the position.”

PAUL:

Of course, the prime minister is too busy urging voters to stay calm about their health, while at the same time making sure they know it's under threat.

And Ruby, the real worry for Scott Morrison is that he may be the first prime minister to take Australia into recession in 30 years.

RUBY:

Paul, thanks so much for talking to me today.

PAUL:

Thank you very much, Ruby. Always great to chat. It was great to see you.

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RUBY:

Also in the news… the federal government has extended its travel ban for Iran, Italy, China and South Korea for another week, and is considering a potential European wide ban as well.

Meanwhile, husband and wife actors Tom Hanks and Rita Wilson are recovering in a Gold Coast hospital after being diagnosed with coronavirus.

And the killer of Melbourne comedian Eurydice Dixon has lost his bid to reduce his time in prison, after Victoria's Court of Appeal upheld his life sentence for the crime.

I’m Ruby Jones, this is 7am, see ya next week.