Call for new big spend

Pain on the way post-September, economists warn

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Economist Saul Eslake. Picture: Brodie Weeding

Economist Saul Eslake. Picture: Brodie Weeding

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Stimulus: Economists are urging Scott Morrison not to pull back on support post-September

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The government should spend an extra $100 billion a year for two years to support the economy, economist Stephen Koukoulas said on Thursday, among a chorus of voices warning of economic disaster post-September.

Economists are pushing for the government to announce a new package of support measures this month, to avoid bankruptcies and a surge in unemployment when the bulk of the government programs ends in September.

Saul Eslake said the healthy performance of Australia's economy over the past 30 years was down to four factors, three of which had now disappeared.

Australia could no longer rely on the above-average population growth of 1.5 per cent a year, with immigration set to stay at net-zero until at least the middle of next year.

The country's unusually close economic relationship with China is also souring, he said, with China having little choice but to buy Australian iron ore but almost all other exports now at risk due to "vengeful actions from the Chinese government". The housing boom is also unlikely to resume, he said.

"So a lot hangs on the fourth of those factors, good macroeconomic policy," he said, urging the government not to make the mistake of tightening spending too quickly. Support should be withdrawn gradually to avoid bankruptcies just as the economy was recovering its footing, he said, and targeted support could be replaced with investment and an expanded safety net to support the vulnerable.

The calls at a Senate inquiry on Thursday came as the superannuation industry said an estimated 480,000 have emptied their super accounts.

Prime Minister Scott Morrison is considering measures to apply from October when support programs end - the biggest being the $70 billion JobKeeper wage subsidy which pays three million workers

The story Call for new big spend first appeared on The Canberra Times.

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