Prime Minister Scott Morrison has dodged saying whether Australia risks a recession in the face of a growing coronavirus crisis.
With Treasury estimating a large cut to economic growth in the March quarter due to this summer’s bushfires and the impact from COVID-19, the prime minister was asked whether he can guarantee Australia will not suffer a recession.
“I can guarantee the Australian people that they will get the strong economic management they voted for,” Mr Morrison told question time on Thursday.
Treasury boss Steven Kennedy earlier told the Senate economic committee the virus could slice “at least” 0.5 percentage points from economic growth in Australia in the March quarter, reflecting the impact it has had on tourism, education and the Australian dollar.
This would come on top of the 0.2 percentage point detraction from growth from the bushfires.
“Beyond this preliminary estimate for the March quarter it is too early to tell, given the uncertainties, what the full impact of the COVID-19 coronavirus will be on the economy,” he said.
The extent of the impact of COVID-19 will depend on a number of factors – how quickly it spreads, disruptions to ports and, should it become more prevalent in Australia, the direct impact on activity.
A recession is classified as two consecutive quarters of economic contraction, something Australia has not suffered for almost three decades.
Shadow treasurer Jim Chalmers has put the government on notice should Australia’s continuous run of economic growth be broken.
“The Liberals and Nationals are now the custodians of those three decades of unbroken economic growth,” he told reporters.
“Australia is being tested right now by the economic impacts of this coronavirus and the government is being tested as well.”
The national accounts released on Wednesday showed the economy grew by 0.5 per cent in the December quarter for an annual rate of 2.2 per cent, still below the long-run average of 2.7 per cent.
The government’s language around the state of the budget has also changed.
Having boasted it was “back in the black” at the time of last year’s April budget, it now says the budget is “back on track”.
“The bushfires and now the emergence of the COVID-19 coronavirus will undoubtedly have a negative impact on the fiscal position,” Dr Kennedy told the committee.
In the mid-year budget review in December, Treasurer Josh Frydenberg forecast a $5 billion surplus, which would have been the first in a decade.
A multi-billion dollar stimulus package to counter the economic impact of the coronavirus is expected to be released next week.
It is tipped to include tax incentives to help businesses with cash flow, alongside tax deductions for new investments.
Funding will be also aimed at infrastructure spending, which normally translates to major road and rail projects.
“It will be worth billions in the terms of the impact it will have,” Mr Frydenberg told Sky News.
“The package of measures will be responsible and will be scalable.”
But the treasurer confirmed there would be no “cash splash” like Labor undertook in the face of the 2008-2009 global financial crisis.
Dr Chalmers said Labor intended to play a constructive role in helping Australia through the period.