* Australia has 1,098 cases of coronavirus, 7 deaths
* Total stimulus so far at about 10% of annual GDP
* NSW, Victoria to shut down non-essential activities
* PM says more stimulus to come

Australia's government will spend additional A$66.4 billion ($38.50 billion) as part of a second stimulus package to shelter the economy from the financial impact of the coronavirus, Prime Minister Scott Morrison said on Sunday, as states moved to impose major lockdowns.

The new stimulus will go to individuals in need and small and medium-sized businesses. Those businesses produce about a third of the country's annual economic output and employ more than 40% of the workforce, according to government statistics.

‘We will be focusing on those in the front line, those who will be feeling the first blows of the economic impact of the coronavirus,’ Morrison said in Canberra on Sunday. ‘There will be more packages and more support.’

The package, which dwarfs the A$17.6 billion ($10.20 billion) in initial measures announced last week, came with a pledge by the government to enforce social distancing rules after many Australians appeared to disregard health warnings and flocked to pubs and beaches amid a warm autumn spell.

After an initial relatively slow spread, the number of coronavirus infections in Australia has been rising quickly in recent days, climbing to 1,098 confirmed cases as of Sunday morning with seven recorded deaths linked to COVID-19.

Morrison said that the government would help underwrite loans to small and medium-sized businesses and boost unemployment benefits as companies are forced to lay off staff.

Jobseekers will get extra money and people in financial stress will also be able access up to A$10,000 tax-free of their pension funds for this and next year, while some not-for-profits and small businesses will have access to cash grants to keep staff employed.

Together with more than A$100 billion announced earlier in emergency banking measures to prevent a credit freeze and the initial stimulus package, Australia has now announced financial measures equalling about 10% of the country's annual gross domestic product, the government said.

‘The degree of stimulus released in such a short period of time highlights the scale of the looming demand shock (due to both containment measures, as well as business and consumer confidence),’ economists at the National Australia Bank said in a note.

‘Some industries have effectively suffered instant downturns, with some already in recession.’

While mineral-rich Australia has enjoyed a near 30-year stellar economic run and passed through the global financial crisis without falling into recession, economists are now forecasting a sharp pull-back in spending.

‘It is impossible to stop a recession because people are staying at home and are not spending, but this minimises the collateral damage where lots of companies go bust and the recession ends up being a lot deeper,’ AMP Chief Economist Shane Oliver told Reuters.

One of Australia's largest employers, Qantas Airways , last week said it would put 20,000 employees on leave as the virus has devastated the airline industry with scores of countries closing their borders.

DRACONIAN MEASURES

Morrison said on Sunday states and territories would start considering ‘draconian’ measures to enforce social distancing in a policy that will be discussed by the conservative government later on Sunday.

The governments of Australia's of New South Wales (NSW) and Victoria, where more than half of Australians live, said they will impose major lockdowns next week closing restaurants and many shops.

‘Tonight I will be informing the national cabinet that NSW will proceed to a more comprehensive shutdown of non-essential services,’ NSW Prime Minister Gladys Berejiklian said. ‘This will take place over the next 48 hours.’

South Australia and Western Australia on Sunday followed similar action in the Northern Territory and Tasmania last week, saying they will close their borders to restrict movement of people.

The Australian Football League (AFL), which has been reluctant to suspend its games, said on Sunday the 2020 top flight Australian rules season will pause until the end of May.

While Australia and neighbouring New Zealand have implemented widespread measures to limit the spread of the virus, most schools remain open and the policies are generally less stringent than those imposed in parts of Europe and North America which have suffered higher rates of infection and are in lockdown.


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