CTRL-ALT-DEL: Rebooting the economy

Economic trends

• National Cabinet to meet: National Cabinet will meet on Friday and top of the agenda will be plans to re-open the economy after a period of hibernation.
• Stimulus and support measures: Federal, state and territory governments and the Reserve Bank have outlined measures totalling over $340 billion or 17 per cent of GDP. The Addendum updates the previous list that was issued on April 20.

Government decisions on easing lockdown restrictions have implications for all sectors.

What does it all mean?

• Australia has made good progress at stopping the spread of the COVID-19 virus. Now consideration turns to re-opening the economy. The health risks are easing but the economic risks are rising. So it is a case of finding some balance.
• But just like when Microsoft Windows closes unexpectedly on your PC, the rebooting of the economy will be in ‘safe’ mode (COVIDSafe mode if you like). Open up too quickly and you risk repeating mistakes made in other countries that attempted to return to ‘normal’ too quickly.
• National Cabinet will review the case for an easing of restrictions on Friday. National Cabinet has outlined conditions to be met before the economy can be rebooted. https://www.pm.gov.au/sites/default/files/files/attachc-precedent-conditions-relaxation-restrictions.pdf
• The COVID-19 cases may lift again when the economy re-starts, but the aim is to keep the process manageable. Certainly the facilities and procedures are now in place to deal with any modest lift in cases.
• The re-start timetable will vary across states and territories. The number of active cases is near zero in Northern Territory, ACT and South Australia. NSW, Victoria and Queensland have a bit further to go. But importantly there is no single road map to follow.
• The cost of the virus crisis has been huge. Federal Treasury estimates it is costing the nation $4 billion a week. Treasury and the Reserve Bank tip a 10 per cent contraction of the economy in the first half of 2020. Output could slide 6 per cent in 2020 before lifting 6 per cent in 2021.
• The impact on the job market is more worrisome. The jobless rate will peak near 10 per cent in coming months but will only fall to 7 per cent in just over 18 months’ time.

What businesses or industries return first?

• Guidelines for COVIDsafe workplaces and activities are already available. And the information and guidelines will be expanded over time. https://www.safeworkaustralia.gov.au/covid-19-information-workplaces

• In the transition to lockdown, there were limits imposed on groups of more than 500 people, and then this was tightened to groups of 10 and then to groups of 2 (numbers varied across states and territories). In the re-start phase, there is likely to be a step back. Social distancing will remain a feature for an extended period. The 4 square metre per person guideline will likely be enforced.

• Retailers that marketed goods considered ‘non-essential’ – covering areas like clothing, discount department stores, car dealers – have potential to re-open first. These may be stores that closed voluntarily or were mandated to close.
• “White-collar” workers will also return to their offices in mid-to-late May with likely enforcement on staggered work hours and enforcement on social distancing.
• A freeing up on travel within states and territories is also likely in the early reboot phase, benefitting regional areas, especially tourism-focussed businesses. Overseas travel (perhaps with the exception of New Zealand) will be amongst the last to re-start.
• The Prime Minister has expressed a wish that cafes, restaurants and clubs can re-open relatively soon, no doubt with significant limits and guidelines. But re-opening is not expected until late May/June.
• Note that the Northern Territory Government announced that “Stage two activities can commence from noon, Friday 15 May, and include indoor activities for less than two hours, such as:
  • Shopping centre food courts.
  • Restaurants, cafes, and bars for the consumption of food – excluding gaming areas.
  • Organised outdoor training activities for sport teams without physical contact.
  • Beauty therapy salons for non-facial services such as nails, massage and tanning.
  • Gymnasium.
  • Public libraries.
  • Places used for religious worship – including indoor weddings and funerals.”
• NSW, Victoria and Queensland make take longer to re-open these businesses, given their relatively large population sizes.
• Many parts of construction, mining and manufacturing have continued to operate over the past six weeks. But greater ‘normality’ will return over May. In particular, fast tracking of infrastructure projects will be important for each of those industries in the recovery phase.

What has each state and economy announced so far?

NSW

• On April 28, the Premier announced the following: “From Friday, 1 May up to two adults and their dependent children will be allowed to visit another household.
• We will see a return of face-to-face teaching from 11 May, and then will consider accelerating a full return to school as soon as possible.
• There have never been restrictions in NSW on what people can and cannot buy, however there may be increased retail activity, with some businesses choosing to re-open. It is important these shops maintain social distancing and hygiene requirements.”
• The full list of the current rules is here: https://www.nsw.gov.au/covid-19/what-you-can-and-cant-do-under-rules
• On May 3, the Treasurer said agents and vendors able to hold traditional property inspections and on-site auctions from May 9.

Victoria

• On May 1, Premier Daniel Andrews said:
  • “The more tests we can get done in the lead-up to 11 May, the more options we will have to potentially ease some of the rules,” he said.
  • “If we are going to change those settings, then we need to be really clear on how much virus is out there in the Victorian community that we didn’t previously know about.”
• Mr Andrews is aiming to complete 100,000 COVID-19 tests before May 11 to allow an easing of restrictions.

Queensland

•  On April 26 Premier Annastacia Palaszczuk announced:
• “From 11.59pm Friday, May 1, Queenslanders will be able to leave their homes for recreation and the distance they can travel has been extended.
• For example, Queenslanders will be able to enjoy some relief from stay-at-home rules and:
  • Go for a drive;
  • Ride a motorbike, jetski or boat for pleasure;
  • Have a picnic;
  • Visit a national park; and
  • Shop for non-essential items
• But there are three conditions that apply linked to the above:
  • Social distancing and hygiene must be maintained
  • You have to stay within 50km of home and
  • Outings are limited to members of the same household or an individual and one friend.”
• On May 1 Premier Annastacia Palaszczuk cleared the way for the NRL season to resume on May 28th, dependent on Chief Health Officer advice that the league’s plan is workable, and the NRL’s assurance that players won’t break restrictions. The Premier said the decision gives clubs permission to travel across the Queensland border to play because they are working and because they are in quarantine. The Premier also said work was being done on other issues such as dining out.
• On May 4, the Premier announced plans for schools
  • May 11: Kindy, Prep, Years 1, 11 and 12 return to learning at school
  • May 15: Assess state-wide response to easing of restrictions
  • May 25: Proposed re-opening to remaining students in remaining grades

On May 5 the Premier issued a media release noting that “Planning continues for the resumption of hospitality and tourism business activity.”

South Australia

• On April 27 schools opened for Term 2 on the advice of the Chief Medical Officer.
• On May 3 Premier Steven Marshall announced:
  • “To guide the delicate process of both continuing to move out of the COVID-19 health emergency and restore the social and economic health of the State, the Marshall Government has established a broad high-level transition team.
  • While maintaining the vigilance of our public health response, the highly credentialed Transition Committee will look at which restrictions should be eased and in what order, as we take the next steps to return the State’s economy and community way of life to the new normal.”

Western Australia

• On April 26 Premier Mark McGowan and Health Minister Roger Cook announced an easing of restrictions:
  • “Indoor and outdoor gatherings for up to 10 people will be allowed including weddings, outdoor personal training, and open house or display village inspections
  • Easing of some of WA’s stage 3 restrictions effective Monday, April 27 2020
  • Allows families and friends to interact more freely, with good social distancing
  • Schools opened for Term 2 on the advice of the Chief Medical Officer.”
• “The changes, based on health advice, will mean indoor and outdoor non-work gatherings will be relaxed to enable for up to 10 persons, lifted from the two person only limit, following continued low number of new cases and the encouraging response to COVID-19 in WA.” “The new 10-person rule aligns WA with South Australia.”

Tasmania

• On May 1, Premier Peter Gutwein announced Additional North West COVID-19 measures to be lifted: “I am pleased to announce that the additional North West COVID-19 safety measures will be lifted from 12.00am this Monday, 4th May.
• The Premier said at the same time “The Government will make decisions about statewide restrictions in the lead up to 15th May.”

ACT

• On May 1 Chief Minister Andrew Barr announced:
• “…reasons for Canberrans to be outside their family home will be broadened from this weekend, allowing Canberrans to leave their home for non-essential shopping purposes.
• This measure will support retail stores as they re-open (whilst maintaining appropriate physical distancing inside their stores). Many retailers voluntarily closed their doors to support community efforts to suppress the virus. Soon many will re-open and the community is encouraged to support them whilst maintaining physical distancing.
• Restrictions on gatherings inside the family home will be relaxed to allow families to visit each other with two adults plus children able to visit outside of those who ordinarily live in a property.
• With travel restrictions eased in NSW, Canberrans should only travel outside of the Canberra region to visit family and friends in small groups while maintaining physical distancing. As much as possible, travel outside of the Canberra region should be carefully considered, as someone bringing the virus into the Territory from interstate remains one of the biggest threats to the ACT.”
• On schools, the Chief Minister said “we are preparing to move to face-to-face delivery during Term 2 if the circumstances allow us to do that sensibly.”

Northern Territory

• On April 27 Chief Minister Michael Gunner announced:
  • The Northern Territory Government will begin re-opening some parks from Noon on Friday 1 May.
• The Chief Minister outlined a transition to a “new normal”:
  • “This transition has three parts:
    • Controlling the borders: to keep the Territory safe and to stop coronavirus from spreading, our borders will stay secured.
    • Rapid response: a “test, trace and trap” plan to contain any future outbreak, minimising the risk to the community
  • Ø  The new normal: Territorians enjoying their lives while also adhering to social distancing, cleaning and hygiene protocols.”
• On April 30 the Chief Minister outlined “The Territory’s Roadmap to the New Normal” (http://newsroom.nt.gov.au/mediaRelease/33205)
• From 1 May, Stage One adjustments will commence. Stage two activities can commence from noon, Friday 15 May. And from noon, Friday 5 June, restrictions will be eased on further indoor activities. By 5 June all Territory businesses, services, facilities and organisations should have their own COVID-19 Safety Plan.
• On May 5 Chief Minister Michael Gunner announced:
  • “The COVID-19 safety plan checklist for businesses and organisations as part of the Roadmap to the New Normal is now available.
• Businesses and organisations seeking to re-open or expand operations as part of stage two of the Roadmap can begin submitting their checklist from today, ahead of opening on 15th May.”

What are the implications for investors?

• The focus now shifts from containment and suppression of the virus to rebooting the economy. The process will understandably be long and staggered. The process may differ across states and territories. The process is not without risks. But the price of delaying the reboot too long is getting higher.
• Governments now have the processes and infrastructure in place to deal with any lift in the number of virus cases. Businesses may need information on what constitutes a new acceleration phase for cases, so they can stay on top. A reacceleration of cases could prompt a reimposition of lockdown measures or a tightening of rules and regulations.
• Investors will need to particularly stay on top of daily information of virus news to gauge implications for companies, sectors and the broader market.

Addendum: Update of stimulus/support measures

Federal Government & Reserve Bank

• March 12: First economic package $17.6 billion (support cash flow and investment spending of business and provide payments to vulnerable Australians)
• March 19: Reserve Bank monetary package includes $90 billion three-year funding facility and $15 billion from the Government to improve access to finance.
• March 22: Second package $66 billion (keep business in business and keep workers in jobs)
• March 30: Third package $130 billion (includes new wage subsidy ‘JobKeeper’ program)

Also

• March 18: $715 million airlines package
• March 28: Regional Airlines Network Support $198 million
• March 20: $444.6 million aged care support
• April 12: $100 million Higher Education relief Package
• April 13: $3 million support frontline health workers
• April 16: $165 million for airlines to maintain critical air routes
• April 28: $94.6 million support for zoos
• May 1: $205 million for residential aged care providers

NSW

• March 17: $2.3 billion economic stimulus package ($1.6bn tax cuts, job creation; $700m for health)
• March 27: 2nd stage economic package including $1 billion fund for jobs

Also

• April 2: $750 million Small Business Support Fund (grants up to $10,000 for small business
• April 7: $100 million to support health workers
• April 9: $51 million free pre-school for six months
• April 13: $440 million land tax break
• April 15: $50 million fee waivers for trades and construction sector
• April 17: $82 million for council childcare centres
• April 20: Bushfire Industry Recovery Package
• April 24: $73 million mental health workers to promote metal wellness
• Apr 29: $250 million cleaners package for cleaning of public facilities
• May 6: $9 million fast-tracked program of courts and corrections facility upgrades in regional NSW

Victoria

• March 21: $1.7 billion Economic Survival package (includes $500m Business Support Fund)
• April 1: $1.3 billion to create 4,000 ICU beds, equipment, capital works and training

Also

• March 15: $100 million for elective surgery
• March 19: $437 million health funding
• April 5: $45 million for sessional kindergartens
• April 15: $500 million support for residential & commercial tenancies
• April 16: $24.5 million emergency funding
• April 17: $3 million family violence
• April 17: $260.8 million emergency funding for TAFE
• Apr 21: $4.7million regional newspapers
• April 23: Extend First Home Owner grants regional Victoria
• April 23: $77.5 million over 2 years for foster & kinship cases
• April 26: $16.8 million Arts survival package
• April 29: $45 million International Student Emergency Relief Fund
• April 30: On-Farm Drought Resilience Grant Program
• May 1: Expand criteria for Economic Survival package
• May 3: $14 million for zoos
• May 3: $40 million from the Business Support Fund will be available to licenced venues
• May 5: $491 million in tax relief, and freeze a host of fees, charges and levies

Queensland

• March 24: $4 billion package (support health, jobs, households & business)

Also

• March 2: payroll tax deferral
• March 17: $500 million in loans to support workers; extend payroll tax deferral
• March 25: $24.7 million support for vulnerable
• April 6: $17.5 million to help health workers self-isolate
• April 8: $5.5 million domestic violence
• April 12: $17 million relief package (including free community kindergarten)
• April 14: $28 million for community based health service groups
• April 18: Government offers $200 million for national support package for Virgin Airlines
• April 23: $4.5 million for Legacy & Lifeline
• April 24: $2.3 million port businesses in far north
• April 24: $12 million resilient infrastructure
• April 25: $54.5 million transport operators package
• April 28: $33.8 million waived in land rent for farmers, tourism &clubs for six months
• May 5: The $1 billion Pacific Motorway upgrade from Varsity Lakes to Tugun has been fast-tracked to bust congestion and create jobs to help in the recovery from COVID-19.

South Australia

• March 11: $350 million package including bringing forward infrastructure projects
• March 26: Second package $650 million Jobs Rescue Package

Also

• March 16: $50 million for local jobs
• March 19: $12 million skills package
• March 29: Fast tracking infrastructure
• April 3: Fee relief tourism businesses; Defer licence fees for minerals & petroleum sector
• April 4: $16 million for training providers
• April 5: $1.6 million for vulnerable
• April 9: $190 million funded from Jobs Rescue Package ($10,000 grants for small business)
• April 10: $5.2 million for taxi industry
• April 15: $6 million for sporting clubs sporting facilities
• April 21: $13.8 million for international education sector
• April 23: Almost 500 schools and preschools will receive grants to undertake priority maintenance work, as part of a $32 million State Government economic stimulus package
• April 24: $50 million in land tax relief
• April 29: $3.35 million in grants for community organisations
• April 30: $2.4 million for domestic violence
• May 1: $1.8 million for bushfire affected businesses

Western Australia

• March 16: $607 million supports households and small business
• March 31: $1 billion economic & health relief package (includes $500m health & front line service delivery)

Also

• March 30: $159 million rent relief for small business
• April 8: $91.2 million police package
• April 23: $24.5 million construction workforce
• April 23: $154.5 million tenants, landlords & construction industry
• April 30: Fast tracking of major projects

Tasmania

• March 18: $420 million Support & Stimulus package
• March 26: $565 million Social & Economic Support package

Also

• April 8: Round 2 of emergency grants open
• April 11: Boosted Digital Ready for Business grants to $400,000
• April 16: school levies refunded
• April 22: $3 million temporary visa holders
• April 22: freeze on rent increases for residential tenants
• April 30: additional $10 million to the small business grants program and a further $10 million in hardship grants
• April 30: waive rego fees for tax operators for !2 months
• May 2: $1.4 million for family violence

ACT

• March 20: $137 million first phase includes rates rebate and commercial rates relief
• April 2: $214 million second phase of $351 million Economic Survival package
• April 22: Fast tracked projects
• April 30: More fast tracked projects

Northern Territory

• March 18: $60 million economic stimulus package includes home & business improvement
• March 24: $65 million (includes $50 million Small Business Survival plan) as part of Jobs, Rescue & Recovery plan
• April 8: $180 million Business Relief for Payroll, Power, Rent and Rates
• April 16: second stage of Small Business survival plan (includes $20m for operational costs
• April 16: $30m home improvement plan doubled (NT Government says now investing $300 million to protect the economy and save jobs)
• April 20: tax relief for hospitality industry and clubs
•  April 30: timetable to ease restrictions
• May 6: one-off grants of up to $10,000 to NT childcare operators

What is the size of the stimulus

• The estimated size of all the measures announced to date has been estimated at near $340 billion. The estimate will need to be reviewed to ensure all the announcements represent ‘new’ money and weren’t covered in prior releases. Some of the measures are not costed. The list may not be exhaustive.