More federal government stimulus packages and the prospect of negative interest rates could be pivotal in helping the Australian economy rebound from the COVID-19 pandemic, mortgage aggregator Finsure Group said.
Finsure Managing director John Kolenda said with the Reserve Bank of Australia (RBA) keeping its cash rate at a record low, further government economic stimulus is a key to recovery from the coronavirus crisis.
Increased grants for new home buyers and renovations for established homes plus other measures to boost residential housing construction are reportedly part of the latest stimulus package being prepared by federal Treasurer Josh Frydenberg.
Mr Kolenda said a big increase to the Commonwealth’s first home buyers’ grant was a key plank to buoy a sluggish housing sector during the global financial crisis (GFC) in 2008.
The grant was temporarily doubled in October 2008, from $7,000 to $14,000 for established homes and trebled to $21,000 for new properties.
“That stimulus resulted in an increase of 300,000 inquiries from first home buyers at the time – one of the greatest uptakes in history – which produced a positive flow-on effect for the entire housing market that benefitted the whole economy,” Mr Kolenda said.
“I applaud the fact that something similar is being considered to counter the economic impact of COVID-19.”
Moving forward, official interest rates were likely to stay on hold for the time being until more economic data provides a better picture of the COVID fallout, according to Mr Kolenda.
He said the RBA might have to reconsider its stance on moving rates into negative territory to take pressure off the Australian dollar and enable banks to lower their lending rates.
“But should the government provide appropriate and adequate stimulus to segments of the economy that drive growth then that would negate a further easing, which in itself has negative outcomes,” Mr Kolenda said.
Ultimately, government stimulus is the main weapon to combat the impact of the virus and the more than $200 billion committed so far has been crucial in helping the hundreds of thousands who have lost jobs and businesses, and maintain some economic activity, he highlighted.
Other measures currently circulating include stamp duty reform, abolishing payroll tax and increasing GST, which could help drive employment and help ease the nation’s debt burden.