But Mr Swan, who was federal treasurer during the Global Financial Crisis, warned demand for goods and services would take a big hit and the government should find ways to encourage spending without giving cash handouts.
“The whole stuff-up with JobKeeper, and saying how great it is to not spend that money, is going to hit confidence, especially after September when everything [wage subsidy payments and the JobSeeker coronavirus supplement] comes to a stop,” he said.
“We had the conservative consumer through the GFC. We’ve now got the frightened consumer.
“[The federal government] need at a minimum a string of shovel-ready projects to stabilise sectors across the economy that have been hit the hardest, plus they need to do something about household consumption.”
However, Mr Fraser said the government should hold off redirecting the $60 billion into other projects for up to a month as restrictions are eased nationally.
“A lot is going to depend on what happens over the next three or four weeks.
“If it remains manageable, there’s less pressure to spend. If it doesn’t come good, if there are outbreaks and clusters and more shutdowns, there’s a real question about how much to spend and where,” he said.
With restrictions being eased across the country allowing more businesses to open, he said the federal government should wait and see what the reaction is as any significant outbreaks of the virus would cause major policy considerations.
However, Mr Fraser said policymakers “should not be sitting on their hands” during this period and should be developing contingency plans for possible situations that may unfold, including households continuing to struggle financially.
“A lot of people out there are doing it desperately tough. If it stays that way there may need to be an extension of time or coverage of the scheme to help some of the most vulnerable people,” he said.
This includes casual workers with less than 12 months’ work who are excluded from JobKeeper, he said, which often includes women, migrants, students and young people.
Another pressing issue for the government is low after-tax income growth, which Westpac chief economist Bill Evans said preceded the virus and was weighing on household spending.
“The legacy issue from the current crisis will be a high unemployment rate that, previous recessions have demonstrated, can be extraordinarily difficult to reduce,” Mr Evans said.
He said “a key initiative” should be to bring forward personal income tax cuts worth about $14 billion per year, which have been legislated for July 2022.
Deloitte Access Economics partner Chris Richardson said the miscalculation was “a sign that the economy is actually much healthier than we thought”.
“Even with this mistake, I give them [the federal government] an A+,” Mr Richardson said.
With the economy reopening, Mr Richardson says the debate must move on from JobKeeper – for which there will be reduced new demand – to enshrining a permanent increase to JobSeeker, the jobless payment formerly known as Newstart.
“Every day that passes, the focus must be on driving unemployment back down again as well as ensuring those on JobSeeker are adequately supported.”
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Jessica Irvine is a senior economics writer with The Sydney Morning Herald.