Public perception of government economic policy could be altered forever by the wage subsidy packaged passed on Wednesday, says a Tasmanian economist.
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The $130 billion package provides business with a way to keep staff employed through the COVID-19 pandemic.
Coronavirus: All the latest updates on COVID-19 for Tasmania
Eligible businesses will receive $1500 a fortnight per employee they keep on over a six-month period starting May 1.
It also brings the total value of government stimulus to about $300 billion.
Tasmanian independent economist Saul Eslake said the package was essential despite its cost.
"It was highly likely that many businesses would not survive the period of the shutdown however long it lasts," he said.
"As a result millions of Australians, at least one million possibly more, would lose their jobs.
"We know from previous experience that when people do lose their jobs in an economic downturn they can take a long time to get back into employment.
"They will have suffered permanent losses of income and their working power over the remainder of their working lives is likely to have been adversely affected."
He said keeping people in jobs could help the economy bounce back faster.
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"I think our agricultural sector, which is about three times larger as a percentage of Tasmania's economy than agriculture is as a percentage of the national economy, is well placed," Mr Eslake said.
"But set against that I think the tourism industry may struggle to some degree."
Tasmanian Chamber of Commerce and Industry chief executive Michael Bailey said the subsidy would help businesses survive in a world where there was virtually no income.
But he expects the economy to look different when the pandemic is over.
"What we might see firstly is a diversification of supply chains but we also could see the return of manufacturing to Australia which I think would be a really good outcome of this," he said.
This financial assistance package is the largest since World War II and proves the government is able to help in times of severe economic distress.
But Mr Bailey doesn't think businesses will expect similar assistance in the future.
"No one could have predicted this or predicted how quickly it escalated," he said.
"Business will know that you can not expect support from the government because firstly the government is paying back money that was put aside for this pandemic and secondly we need to act as businesses and cover our risk."
However not everyone agrees.
Mr Eslake said measures governments put in place in times of crisis can set a precedent about what is expected in the future.
"The traditional responses of governments to economic downturns: tax cuts, public works spending, other stimulus measures as well as cutting interest rates, were lessons learned from the experiences of the Great Depression," he said.
"Of course the circumstances of this emergency are in some extent unique in that the loss of business, the loss of revenue, the loss of jobs are the direct result of decisions that governments have made in the interests of public health and saving people's lives."
Paying back national debt
Mr Eslake said Australia's national debt could end up being about 40 per cent of our GDP by the end of this pandemic but there is no reason taxes need to be raised to pay it down.
"History tells us that government debt doesn't have to be paid off by any particular point in time in the future," he said.
"In Australia's 120 years of history as an independent nation there have only been about two or three years where the government has had no net debt."
He said compared to other industrialised countries Australia was in a good position to absorb the debt, although some economists have argued there was no need to issue debt in the first place.
Newcastle University Economics Professor Bill Mitchell is one of the founders of the idea of modern monetary theory.
He said there was no reason the debt incurred through this wage subsidy and other stimulus packages needed to be paid back.
In Australia's 120 years of history as an independent nation there have only been about two or three years where the government has had no net debt.
- Saul Eslake
"The Reserve Bank is going to buy all of that debt," Professor Mitchell said.
"The Reserve Bank is everyday now buying millions of dollars of government debt so at the end of the day you've really got the government buying its own debt.
"What's going to happen? The government owes itself money, so what? Left pocket,right pocket."
Mr Eslake cautioned against the idea of governments printing money to pay off their debt. He said it could work in times of recession but carries several risks including inflation and weakening the Australian dollar.
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