Bold action is required, and bold action is being delivered

Bold action is required, and bold action is being delivered
by admin-acuityfund
Written Articles by Ranjit (88)
Posted on March 27, 2020

Governments, the Reserve Bank and retail lenders have responded to the COVID crisis with a series of bold measures to keep money circulating throughout the economy.

The calculation is simple: lenders need to keep lending, employers need to keep employing and consumers need to keep consuming. And each party needs to believe that the other two will keep up their end of the bargain, otherwise they might hold back.

Hence the bold action from our political and banking leaders.

At the federal level, the Morrison government has announced two stimulus packages worth a combined $189 billion over the forward estimates, or a massive 9.7% of annual GDP.

The Reserve Bank has made two interest rate cuts and resorted to quantitative easing (QE).

Our banks have made rate cuts, granted repayment holidays and shown a willingness to keep lending.

Some people question whether those in authority have taken the right measures or gone hard enough. Fair enough – we live in a democratic society and debate is healthy. However, we also need to recognise how much pressure our leaders are facing right now. This is an unprecedented crisis, and they’re doing the best they can.

How the government and ATO have responded

The federal government’s actions include:

● Paying an extra $275 per week to the unemployed
● Making two $750 payments to senior citizens
● Allowing workers early access to $20,000 of their superannuation
● Increasing the instant asset write-off threshold from $30,000 to $150,000
● Allowing eligible businesses to deduct 50% per cent of the cost of an eligible asset on installation
● Giving eligible SMEs that employ staff a tax credit of $20,000 to $100,000
● Giving eligible employers a 50% wage subsidy for apprentices and trainees
● Giving businesses a tax holiday of six months

How the RBA has responded

The Reserve Bank’s actions include:

● Cutting official interest rates from 0.75% to 0.25%
● Providing liquidity to Australia’s financial markets
● Providing financial support to banks so they keep lending
● Promising to purchase Australian government bonds as required

How the big four banks have responded

Australia’s big four banks have also stepped up, with actions including:

● Cutting rates on home and business loans
● Offering repayment holidays of up to six months for home and business loans
● Increasing funding for unsecured business loans

I don’t know how much longer this crisis will last, but I do know that I’m glad our leaders have been taking decisive action.