Information paper - Macroeconomic policy: avoiding the cliff

In the first paper in the CEDA Council on Economic Policy Economic Recovery Series, Professor Percy Allan and The Hon. Dr Craig Emerson consider the need for new macroeconomic policy to avoid the 'cliff' marked by the end of the Federal Government's initial support measures in September

"There is a serious risk that the Australian economy will relapse into deep recession once most of the existing fiscal relief measures expire at the end of September 2020. To avoid that fate, the Federal Government should adopt another large round of fiscal stimulus."

- Professor Percy Allan &  The Hon. Dr Craig Emerson

For policy makers the burning issue is how to prevent the Australian economy suffering a double-dip collapse after existing income and other Federal Government support measures designed to offset the effects of the COVID-19 pandemic expire in late September 2020.

The Federal Treasurer, Josh Frydenberg, will provide an updated economic and fiscal outlook on 23 July, which is expected to outline some features of the government’s fiscal strategy ahead of its full budget on 6 October 2020. 

This paper canvasses the broad fiscal and monetary policy options to avoid an economic cliff at the end of September 2020 and to revive the economy thereafter to limit any ongoing trauma from COVID-19.