The stimulus package unveiled by the Australian government will help support the residential building market, experts say.
The government announced a $17.6bn economic plan yesterday in an effort to help mitigate the potential risks arising from the coronavirus outbreak.
The package has four parts, which include supporting business investment; providing cash-flow assistance to help small- and medium-sized businesses; extending aid to the most severely affected sectors, regions, and communities; and providing household stimulus payments that will benefit the wider economy.
What does the package include?
While the measures are all temporary and targeted, Prime Minister Scott Morrison said they will ensure that the country responds to the immediate challenges COVID-19 poses.
"Just as we have acted decisively to protect the health of the Australian people, based on the best evidence and medical advice, our support package responds to the economic challenges presented by this pandemic in a timely, proportionate and targeted way," Morrison said in a statement.
The stimulus payments to households will comprise $4.6bn of the economic package. The package will provide a one-off $750 stimulus payment to pensioners, Social Security, veteran and other income support recipients, and eligible concession cardholders.
The payment will be tax-free and will not count as income for Social Security, Farm Household Allowance, and Veteran payments. Payments will be made starting 31 March 2020 on a progressive basis. Around 90% of payments are expected to be made by mid-April.
Also included in the package is $1bn in assistance to severely affected regions and industries such as tourism, agriculture, and education.
This assistance will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks.
Additional assistance to help businesses determine alternative export markets and supply chains will also be included in the economic package.
The government will use $3.2bn to provide a time-limited 15-month investment incentive. This will help businesses accelerate depreciation deductions.
A further $700m will be used to increase the instant asset write-off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500m.
To provide cash-flow assistance for businesses, the government will allocate $6.7bn. This is set to benefit around 690,000 businesses employing around 7.8 million people.
Furthermore, $1.3bn will be given to small businesses to support the jobs of around 120,000 apprentices and trainees.
Also read: Will coronavirus impact property prices?
Good move for the residential sector
Tim Reardon, chief economist at the Housing Industry Association (HIA), said the stimulus package is a good move, particularly the specific assistance targeted to apprentices, who are usually the first to take a hit during periods of economic downturn.
"The Australian government pledged $1.3bn to support keeping apprentices employed by providing small businesses up to $21,000 per apprentice to subsidise apprentice wages by around 50%," Reardon said.
The package will also help small businesses to mitigate losses during the cycle.
"The extension of the instant asset write-off scheme to businesses with a turnover of up to $500m, and to an asset value of up to $150,000, will also assist small businesses in the construction industry," Reardon said.
Master Builders Australia CEO Denita Wawn said the government is committed to doing whatever it takes to boost confidence amid the COVID-19 outbreak.
"We strongly back the moves to back businesses, particularly small businesses, to keep workers and apprentices employed. The danger with economic shocks is that the labour market recovers slower than the rest of the economy, so moves to offset employers shrinking their workforce is very well-targeted," she said.
However, Wawn said there is a need for the government to step up and ensure that the construction of projects currently underway will continue and that the developments scheduled to commence are not delayed or withdrawn.
"Our industry also remains nervous about how protracted the inevitable shortage and delayed delivery of imported building products will be. This is a hit to our industry that is looming over the next few months and additional measures and extensions of some of stimulus measures may be required to help the industry weather that storm," Wawn said.
In a previous analysis, Kristin Brookfield, chief executive for industry policy at HIA, said the residential building industry should remain one of the priorities of the Australian government when thinking of ways to stimulate the economy.
"Australia is emerging from a residential building downturn, and in the face of the coronavirus shock, stability and clear direction to ensure the housing market does not take a backward step is essential," she said.
Brookfield said guaranteeing a stable residential building sector will help uplift industry and consumer confidence.
Coronavirus impacts yet to unfold?
Adrian Kelly, president of the Real Estate Institute of Australia, said in a statement that the market will likely be affected more by the reduced consumer sentiment than the actual coronavirus itself.
"I am already hearing of many stories whereby potential vendors are deciding not to sell at this time, preferring to wait until things normalise," he said.
Kelly said, however, that it would be better to sell in a market with less competition, given that buyers will continue to purchase regardless of how the sellers might be feeling.
"I suspect any reduced consumer sentiment is likely to be magnified in the larger cities than in regional parts of Australia. I have no doubt that once this situation is managed and under control, our markets will return to normality just as they did after the bushfires earlier in the year," he said.