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Market panic after coronavirus spending stimulus packages
"As crown avars cases Roy's across the country and industry shuts down hundreds of thousands of people. Losing jobs and businesses across the country lay going broke so is government spending enough or too much and how long can the Australian economy survive before we keep into irreparable damage? Are WE AS POOR. Kili asks in the Australian newspaper This Week. We burning the village to save it. Daniel would is budget policy and institutional reform program director at the Graduate Institute. And she's the incoming chief executive officer of the Graduate Institute and Salmon. Cowan is the research director at the Center for Independence Studies at Sydney. Think tank that I had up Danielle Salmon. Welcome both of you. Thank you come now. Danielle the in response to the government's big spending stimulus packages those a seventeen billion dollar package about a fortnight ago. Then another six billion dollar one earlier this week in response the markets panicked a full stampede trends indicate that the markets will continue their stampede lock fraught and capital is all this government largess justified. Look I think it is absolutely justified when you look at the style of health challenge. And what the government's trying to do to keep that contained in terms of effectively shutting down pretty significant sectors of our economy You know the hospitality industry is gone. anything that relies on social consumption so a lot of businesses headdresses petitions. The canucks very significant swipe at the economy. And so we need this government package in order to support the businesses during what is going to be a very shop. It comes down to it. Jonathan Freedland in the Guardian this week Sam and he says just as there are no atheists on a sinking ship. There are no free marketeers independent so manure relating free-market t doesn't this unprecedented cross justify unprecedented measures such as much bigger government. Well you've wrought remind frame rocketeer evening across as so. I guess that's a positive spun for from Mor perspective. I think there's an important distinction that we need to make I here. Which is the audio of stimulus as opposed to the broader concept of what government support government action in a pandemic? Cannon should be so the idea that what the government can or should do his prop up. Economic growth is in the short term. Which is what stimulus is. I think that that's a very mistaken idea. It's a mistake and concert. Not The least of which because what? We're actually trying to do here is Danielle roughtly. Daddy shutdown pots economy for health rights. So the the issue here is not so much. A case of should the government being involved in short term stimulus. It's what sort of support package. Should we give to cushion some economic impacts of this crisis in? What should we do on a health perspective? Now of an expert on the hill saw things. That's where the government's getting its health advice from an economic perspective. I think it's important to realize that we cannot prop every business in in the country. You know Macaroni France. Basically said we won't let a single business go bankrupt. That would be a stike. We're looking at a potentially protracted shut down in the economy with significant economic impacts. And we need to be smart in strategic about how we deploy our resources. The government doesn't have an unlimited budget. Econ prop up. Everyone and it shouldn't try and provide support to everyone. What it needs to do is target. It's assistance to the areas most in need to the people most in need and ensuring that when we come out the other side of this whereas applies to as we can be to get coming out on the other side of this means massive deficits as far as the. I can see and that would imply a substantial future tax increase crosses. Maybe as soon as next she wouldn't that retired the recovery. Daniel look really depends on how quickly you try to pay down the debt. And you're absolutely right when we will be wrecking up a substantial amount of with these reforms. There's absolutely no question about that So essentially we are asking future generations to pay for this response but given the importance of supporting business through this and I do agree with him. We will not say every business here. But we absolutely need to avoid. Is You know what will be preheated to economics and the economy becoming a permanent one if we lose a lot of productive capacity and the economy that has got to be the priority. Right now yes it waiting for that we go substantial debt to pay off the government will hopefully find a path to do that in a way that will not hit the the economy is coming out of the what happens if the pandemic lasts into the winter and early. Spring Salmon Cowan that the CLEM will be for another round and then another round of high levels of government spending. Is that really sustainable? Well it's an interesting question Australia's coming into these spots. A lot of people were not an is good spot as wearing two thousand night. But we're not coming into these crosses with government dead at one hundred percent of Jj pay a lot of the countries in Europe. The challenge I think here is and what the government You know it's difficult for the government to do this because it's been so reactive in such a short period of tall it but it is. How can we draw on the resources of society? More broadly so that we don't put the entire burden for these onto future generations. You know if you sort of think of it in these terms Government has its role to apply. It will take its level of debt individuals who have resources businesses who have resources we should encourage them to access those resources as well One good example. These we have caught a good deal of money in superannuation that could be used to support people in the short term. It's not going to be a complete substitute for an expanded welfare system in this cross but it could take some of the pressure off the system at a point in time where we don't know how long this will last Danielle. The government did announce that would allow Australians to access a superannuation. What's your position on that yet? Look wait we think unbalanced the good idea and clearly difficult decision for individuals to make to to draw down on the sweeper particularly the time when we hear the knock. It's onto forming. Particularly well sited the value of their investment might not be what they were but in a world in which the government is offering generous safety net but for many people that will not be enough if I have lost their jobs to keep up with their bills So we think allowing people to tap into those saving given the extraordinarily nightshirt. These crosses is a good idea to help people get