(Australian Associated Press)
The federal government should be prepared to maintain its assistance to business for as long as a year because it will take time for firms to get back to normal once the coronavirus crisis is declared over.
Australian Industry Group chief executive Innes Willox also believes the impact of COVID-19 has exposed gaps in the economy that are too reliant on overseas supplies.
“My prediction will be that post this there will be a significant push towards doing more back in Australia,” Australian Industry Group chief executive Innes Willox told ABC radio on Wednesday.
“I think self-reliance will become more of a mantra.”
From the early stages of the crisis, supply chains broke down given Australia’s dependence on Chinese imports, which more recently has been felt in medical goods, such as face masks.
The Morrison government has already legislated for tens of billions of dollars worth of financial support for business over coming months to help keep their doors open and their staff employed.
While thousands of jobs have already been lost as the hospitality industry shuts down in an attempt to curb the spread of the virus, more are expected to be lost.
Mr Willox said businesses are trying to hang on to staff where they can because they know once they lose them they will be hard to get back.
“One day when this is over business won’t just return to normal the next day, it is going to take time for business to get up and running again,” he said.
“So whatever assistance is in place has to last maybe three to six months longer than this.”
Despite all the doom and gloom, Australian shares rallied a further four per cent on Wednesday on hopes that a massive US stimulus will support the world’s largest economy.
The Australian government has given up on its much-pledged return to a budget surplus this year in attempt to cushion the blow to the economy from COVID-19 and now looks set to run up massive deficits.
Westpac economists expect a deep recession – the first in nearly three decades – and a spike in the unemployment rate to 11 per cent by mid-2020, more than double the rate it is now.
As such they expect the budget position will deteriorate sharply over this year and next.
From a balanced position in 2018/19, they expect the budget will sink into a $90 billion deficit in 2019/20 and than $160 billion in 2020/21, which take into account the government’s stimulus measures and the deterioration in the economy.
“We would caution that the situation is very fluid. It remains highly uncertain how long the widespread shutdowns and cancellations wreaking havoc on the economy will persist,” Westpac economist Bill Evans said in a note to clients.