Australia’s big four banks will suspend small business loan repayments for six months to guard against the economic tsunami of coronavirus.
The assistance package will apply to more than $100 billion of existing loans.
Australian Banking Association chief executive Anna Bligh said it could put $8 billion back into the pockets of small businesses.
“This package is designed to go hard and as fast as possible to small businesses,” she told reporters in Sydney.
“That is where it is needed most today in order to avoid more people falling out of work and into mortgage distress.”
The measures are not restricted to any sectors, with banks set to be flexible on eligibility criteria between small and medium companies.
Ms Bligh said banks could also look at measures to help people struggling with repaying home loans if the financial aspect of the virus crisis deepens.
“If we start to see any similar critical need in other parts of the community, including mortgages, that is something they know they will have to look at,” she said.
“But at this stage the most urgent and pressing need is for small businesses.”
The Morrison government is also plotting a fresh round of stimulus measures after announcing a $17.6 billion package last week.
Treasurer Josh Frydenberg said the next package would extend support for small business and assist sacked workers.
“This second package we are working on right now is about cushioning the blow for so many of those Australians who may lose their job,” he told Sky News on Friday.
At an emergency meeting on Thursday, the Reserve Bank cut the cash rate to 0.25 per cent, the lowest in Australia’s history.
The central bank will also start buying government bonds to flood Australia’s financial system with extra cash to keep the economy functioning smoothly during the crisis.
A three-year $90 billion fund for banks to help small- and medium-sized businesses will be established, while the government will give $15 billion to small lenders.
Mr Frydenberg wants bank loans to help businesses pay rent, wages and utilities bills.
“They need that cashflow support so they can meet some of their fixed expenses,” the treasurer said.
He said the government’s second package would not look at structural changes which can’t be removed after the crisis is over – a position which will be welcomed by credit agencies.
“Our focus is on targeted measures using the existing tax and transfer system and making it as simple and as easy as possible for Australians to get that support,” Mr Frydenberg told the ABC.
He also poured cold water on suggestions the government could nationalise major companies, like Virgin Australia.
“That’s not our focus right now.”