Australia Announces Massive A$66bln Stimulus Package

Australia Announces Massive A$66bln Stimulus Package
March 24, 2020

 

The Aussie rose against the greenback yesterday despite the roll-out of another massive round of stimulus package worth A$66 billion by the Australian government. The latest series of incentive measures were aimed at backing households and enterprises and resolving complexities created by the coronavirus (COVID-19 disease). After opening at 0.5756, the AUD/USD pair declined to a low of 0.5722, before rebounding to reach a high of 0.5840 in the past 24 hours.

The recent announcement, along with the previous stimulus package, puts the aggregate stimulus to A$189 billion or 9.7% of the country’s GDP.

Prime Minister Scott Morrison stated that the government would do everything necessary to safeguard the deprived. Scorr Morrison said, “We will be doing everything we can to protect those most vulnerable to the impacts of this crisis and to preserve the businesses that employ them. There will be more support to come.”

Treasurer Josh Frydenberg said, “The Australian people can be reassured that tonight, their parliament reached across the political divide and passed the most significant set of measures since war-time.”  

Furthermore, the government increased the cash support for SMEs, meeting relevant criteria, to A$100,000. The government will act as a guarantor for 50% of SME loans. Notably, the exigent asset write-off ceiling was increased to A$150,000, from A$30,000.

Other measures include the introduction of a time-bound 15-month investment bonus to back enterprise investment and economic expansion in the near-term, by speeding up wear-and-tear deductions. Release of savings money before maturity and temporary cuts on superannuation minimum withdrawal criteria are other initiatives announced by the government.

The government has also announced A$550 for job seekers, parenting, and farm households. In addition, two distinct A$750 allowance is offered to support households. Pensioners represent 50% of eligible recipients.

Australia is also inching towards closing down a major portion of its service sector. Marcel Thieliant, an economist at Capital Economics, anticipates the country’s GDP to decline by 4% in 2020.

Salient features of the second stimulus package:

  • Income support doubled from A$550 per fortnight (Newstart scheme) to A$1,100 per fortnight.
  • Another A$750 payment, in addition to the first one, for those receiving income support, but ineligible for coronavirus payment.
  • Facility to withdraw A$10,000 from superannuation fund in 2020 and 2021.
  • Cash payments of between A$20,000 (small business) to A$100,000 (large business).
  • Increasing market liquidity by A$105 billion, with a maximum loan of A$250,000 to companies, repayable over a period of 3 years. This includes a holiday period of six months.
  • Amended insolvency and bankruptcy law under which creditor can initiate insolvency proceedings with claims of up to A$20,000, from A$2,000 earlier. Response time was extended from 21 days to six months.

The stimulus package is expected to keep the Aussie range-bound with a bearish bias.

The historical price chart indicates that the AUD/USD pair has bounced off the support at 0.5715. The next resistance is at 0.6185. Furthermore, the currency pair is also trading above its 50-day moving average. The MACD indicator also has a positive reading. Therefore, we are anticipating the currency pair to move up in the short-term.

AUD - techncial analysis - 24th March 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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