Sixty minutes prove the risks facing stimulus plan to avoid recession

It took just 60 minutes for the threat to the Morrison government's $17.6 billion stimulus package to be laid bare.

Just after Scott Morrison and Josh Frydenberg outlined a package heavily weighted to supporting business but which relies on households to deliver a recession-beating boost to the economy in the June quarter, US President Donald Trump addressed his voters.

In the space of 15 minutes, as the President revealed a ban on travel and trade with Europe, the ASX200 shed more than 1 per cent in value. Within an hour it had lost 5 per cent.

Some of this was recovered when the Tweeter-in-chief corrected himself (trade is not to be banned for the next 30 days) but the damage had been done.

Links between the two richest parts of the developed world, the US and Europe, were severed in a way not seen since U-boats prowled the North Atlantic.

This is the sort of trouble any stimulus package faces - events well outside the control of the government and its policy advisors could play absolute havoc with the best laid plans.

Almost three hours after Trump's address, the Australian government confirmed it was looking at its own ban on people from Europe. And given the size of the outbreak in the United States (where the lack of testing is clearly hiding just how many Americans are infected), a similar ban on the US will soon have to be considered.

The package put together by the government is aimed squarely at avoiding an economic contraction through the June quarter.

It knows the March quarter will be negative, only the fourth one since the last recession in 1991. All policy is now being thrown at the June quarter.

Into the next three months will go $4.8 billion in cash payments to people who will spend almost every dollar and cent. Business gets $5.9 billion in wage subsidies plus $3.8 billion in assistance to pull forward capital spending.

Combined, Treasury believes it will boost economic growth by 1.5 percentage points through the June quarter.

That should be enough to avoid a negative quarter which, combined with a negative March, would deliver the country a recession.

But it's predicated on an economy not already being in free-fall. The Trump ban on Europe, if repeated by Australia, would deliver a huge blow to the government's stimulus.

It's predicated on businesses being able to buy the capital goods, from harvesters to computers, that are heavily affected by the supply-chain problems caused by the coronavirus.

It's predicated on households - which Treasury estimates will deliver 40 per cent of the economic boost in the June quarter - spending their cash rather than doing what many did with their tax cheques, which was to leave it on their mortgage offset accounts.

And it's predicated on the health impact of the coronavirus not getting worse. Sporting events in front of empty stadiums is one thing but if millions of workers can't do their job then the economic fallout will overwhelm the package.

Morrison, Frydenberg and Treasury have come up with a package with the clear intent of propping up businesses and households long enough to avoid a recession.

But no one really knows the full economic impact of this health crisis. In one day we've gone from Trump's European ban to the NBA suspending its season to Tom Hanks being cared for in a Gold Coast hospital.

The coronavirus outbreak is proving to be faster moving than any Treasury or politician.