Australia to bolster housing sector with A$688 million stimulus

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Australia has announced a A$688 million ($476 million) stimulus package aimed at bolstering the housing construction industry, as the coronavirus-hit economy heads for its first recession in 29 years.

New homebuilders and homeowners undertaking substantial renovations will get A$25,000 cash grants under the program that's set to expire at the end of the year. It's designed to support the 140,000 direct jobs and 1 million related jobs in the residential construction sector, which generates around 5% of the nation's economic output.

"This is about targeted taxpayer support for a limited time using existing systems to ensure the money gets used how it should by families looking for that bit of extra help to make significant investments themselves," Prime Minister Scott Morrison said.

The fresh stimulus comes after massive packages announced to bolster welfare and keep idled workers employed during Australia's coronavirus lockdown. Success in curbing the spread of the virus has allowed lockdown measures to start to ease, with Morrison aiming for most activity to resume by next month.

Still, it will be too late for the nation to avoid recession. Treasurer Josh Frydenberg responded with a simple “yes” on Wednesday when asked if Australia was on track for two consecutive quarters of negative growth. Gross domestic product declined 0.3% in the first three months of the year and that downturn is set to deepen in the current quarter as the full effect of the shutdown to stem COVID-19 takes hold.

The HomeBuilder program announced by the prime minister on Thursday doesn't include structures not attached to the home, such as swimming pools or garages. It will be restricted to middle-income earners and new homes valued at no more than A$750,000.

The Housing Industry Association welcomed the announcement, estimating it could generate more than A$15 billion in economic activity.

"This incentive will help to address the projected decline in housing activity over the next 12 months," HIA said in a statement on Thursday.

Bloomberg News