US President-elect Joe Biden has unveiled the plan for a $US 1.9 trillion stimulus package. This stimulus aims to control the Coronavirus situation and recover the economy.
The package plans to allocate $400 billion towards their COVID-19 response. This includes accelerating their national vaccination program. It also plans to deliver a $1400 direct payment to support American individuals. Other measures include child care subsidies, enhanced unemployment aid and small business support. These plans underline the US Government’s intent to provide the necessary support for their economy.
In response to this plan some economists have revised their US growth forecasts. Goldman Sachs, a multinational investment company, has raised their US gross domestic product (GDP) growth estimate to 6.6% for 2021. This is up from their previously estimated 5.9% growth. GDP measures the total value of goods and services produced in a country in a specific time period. A higher estimate indicates that the US economy may recover faster than anticipated. This comes as they work to roll-out vaccines nationwide and put COVID-19 under control. This could see consumer spending bounce back in the latter half of 2021.
What does this mean for Australia?
The US economy is the world’s largest economy. It has the capacity to influence investment activity around the world. The Australian market has responded well to the announcement of their stimulus plans. The Australia stock market is almost back to its highest level since February 2020. With significant plans to support and recover the US economy, investors are more likely to feel confident about the future.
The US is also Australia’s largest foreign investor. Foreign investment is an important source of funding for Australia. Access to foreign capital helps to support new and existing industries. This can enhance infrastructure and our ability to produce goods and services. It can also create more employment opportunities for Australians and help boost our economy. As the US plans its economic recovery, American companies may begin to feel more confident. This could potentially see more American companies seek out new opportunities and expand their investments into Australia, which in turn can help to support our own economic recovery.
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