Abstract
Australia economy has continued to grow in the last 5 years. The macroeconomic performance indicators shows that the rate of unemployment is steady, the GDP is continuing to rise and inflation rate is stable.
COVID-19 pandemic will have an intensive impact on Australia economy and other countries across the globe. It is not known when this pandemic will end and this makes the outcome of its impact to be invisible. It is a health issue challenge but it has affected the economy as a whole.
There are policy measures that Australia and India government have adopted to ease the spread of the virus and reduce the negative impact of COVID-19 on their economy.
These measures will boost small businesses, minimize the rate of unemployment, balance demand and supply.
Australia and India have not experienced an economic shock like this before. Australia economy was affected negatively by bushfire that occurred few months ago. They were in the process of recovering when this pandemic reached.
Before COVID-19, India was still struggling with their economy. It will be more affected since most of the workers are casual and the government has already implemented restriction orders such as social distance.
The spread of the virus resulted to social distancing which made the financial markets, businesses, events and corporate off to shut down. It also resulted to ban if international and domestic travel. Tourism is one the sectors that contribute to growth of the economy but this time it is not contributing anything due to the restrictions.
Introduction
Businesses depend on the stability of macroeconomic environment in order to be competitive in its business operation. Therefore, stable economy plays a vital role for businesses and the country as a whole but it does not raise the nation productivity alone.
When a government is paying a high interest rate for the debt, it cannot be able to provide services smoothly. Moreover, when inflation rate is high, businesses cannot perform efficiently. Thus, the stability growth of a country economy is inadequate unless the macro environment is stable.
There are several macroeconomic indicators such as Gross Domestic Product (GDP), Unemployment rate, inflation rate. These indicators are used by policy makers to determine whether the country economy is health or not (Muggae, 2016).
GDP
GDP is used to measure the total sum of expenditure on final goods and services produced in a country economy. It includes all consumers’ expenditure on goods and services apart from purchase of new houses since it is included in gross fixed capital formulation.
In 2014, Australia economy increased by 2.3 percent even though the real net national the terms of trend reduced by 10. 3 percent which was the biggest since 1960s and the disposable income reduced by 0.1 percent.
The Household saving ratio reduced by 0.5 percent on 2014 while market sector labor productivity rose by 1.4 percent. Australia GDP in 2014 was mostly contributed by households which contributed to 1.4 percent of the GDP growth and export of goods and services which contributed to 6.5 percent increase in GDP (ABS, 2014). The GDP in 2014 was US$1,111.9 billion.
In 2015 Australia GDP was US$1,151.7 billions which were an increase of 2.8 percent.
Australia recorded an increase in real net national disposable income and labor productivity in the market sector and a decrease in saving ratio.
Australia GDP in 2015 was mostly contributed by export of goods and services by 1.3 percent, domestic final demand contributed to 1.3 percent.
In 2016, the GDP increases by 2.0 percent. It rerecorded a GDP o US$1,197.2 billion.
Australia GDP in 2016 was mostly contributed by government consumption which contributed 0.8 percent and household consumption contributed to 1.2 percent GDP growth.
There was 2.9 percent increase in Australia GDP in 2017. It was mostly contributed by household consumption by 1.6pp, government consumption contributed to 0.7 percent and 1.0 percent of gross fixed capital formation.
Australia GDP increased by 1.9 percent in 2018. It recorded US$ Australia GDP in 2018 was mostly contributed by real net national disposable income by 5.6 percent and domestic final demand contributed to 1.5 percent in GDP growth.
Australia GDP in 2019 grew by 0.5 percent. Throughout the year, GDP was 2.2 percent. There was a decrease of 5.3 percent in household.
Australia GPD growth rate was high in 2017 and low in 2019
Unemployment
In 2014,Australia unemployment rate remained at 6.2 percent. The number of people who were employed increased by 11,400 while the number of increased by 700. The country trend participation rate remained constant at 64.7 percent.
The number of employed people increased by 27,500 and the number of unemployed people reduced by 9,900 in 2015. The unemployment rate was 5.8 percent. Australia participation rate was 65.2 percent.
There was an increase in the number of employed people in 2016 by 8,200 which was an increase in both full time and part time employment. In 2017, the rate of employment increased by 0.7 percent. The unemployment rate was 5.8 percent and participation rate was 64.6 percent.
In 2017,the Australian unemployment rate was 5.4 percent and the participation rate was 65.5 percent. The ratio of employment to population was 62.0 percent.
The unemployment rate in 2018 was 5.0 percent. The number of employed persons increased by 23,100. The number of full time employed increased by 11,800 and 11,200 part time employment.
In 2019,the unemployment rate was 5.1 percent. The number of people who were employed increased by 18,000.
Inflation
Inflation rate is the rate at which currency loses its value. Inflation rate is brought about by an increase in money supply, high national debt, increase in demand pull effect, increase in cost push effect and exchange rate. It is calculated by change in consumer price index (CPI).
Inflation occurs when the price of goods and services increase. This increases the cost of living and decrease the purchasing power. Inflation increases the consumer price index and unemployment.
The CPI for all groups increased by 0.2 percent in 2014. There was an increase of domestic holiday and accommodation by 5.8 percent, 4.8 percent on the price of tobacco and 1.1 percent price increase on purchase by owner occupiers.
The price of automotive fuel reduced by 6.8 percent, a decrease of 5.2 percent on visual and computing equipment and 3.8 percent decrease on audio, visual and computing media and services.
There was an increase of all CPI groups by 0.4 percent in Australian CPI in 2015. The most significant price rises was tobacco by 7.4 percent, 2.4 percent increase in international holiday travel and accommodation. There was a decrease of 5. 7 percent on automotive fuel, 2.4 decrease in telecommunication equipment and services and 2.6 percent decrease in the price of fruits.
All CPI groups increased by 0.5 percent in 2016. The most significant price rises was 7.4 percent on tobacco, 6.7 percent increase on automotive fuel, 5.5 percent increase on domestic holiday travel and accommodation and 0.5 percent increase on new dwelling purchase by owner-occupiers.
There was a decrease of 2.6 percent on international holiday travel and accommodation, 5.1 percent decrease on accessories and 3.2 percent decrease on waters, soft drinks and juices.
In 2017, there was 0.6 percent increase on. The most significant price increase was 10.4 percent automotive fuel, 8.5 percent on tobacco (+8.5%), 6.3 percent on domestic holiday travel and 9.3 percent on fruit. In 2017, the price for international holiday travel and accommodation reduced by 1.7 percent, 3.5 percent on audio visual and computing equipment and 1.4 percent on telecommunication equipment and services.
There was 0.5 percent increase in CPI in 2018.
The most significant price increase was 9. 4 percent increase on tobacco, 6.2 percent on domestic holiday travel and accommodation, 5.0 percent on fruit and 0.4 percent on new dwelling purchase by owner-occupiers. There was a decrease of 2.5 percent on automotive fuel, 3.3 percent on audio visual and computing equipment, 1.9 percent on wine and 1.5 percent on telecommunications equipment and services.
Australia CPI in 2019 rose by 0.7 percent. The most significant price increase was 8.4 percent on tobacco, 7.3 percent on domestic holiday, travel and accommodation, 4.4 percent on automotive fueland 6.8 percent on fruit. There was a decrease in prices for international holiday, travel and accommodation by 2.9 percent, 2.5 percent decrease on women garments for women and 1.6 percent on wine.
Impact of COVID-19 Australia economy
COVID-19 transmission is uncontrollable and has caused disruption in health and Australia economy and other countries across the globe. The pandemic resulted to an increase in the price of commodities, Australian dollar (AU$) has devalued against United States dollar (US$) to a level that has not been experienced since global financial crisis (GFC) (Jeremy et al. 2020).
Australia capital productivity has decreased with about 0.57 percent, 1 percent increase in total government spending on health and public order. The country has also experienced a technological shock. Imports and exports has also reduced. Consumers spending has also reduced since they are more cautious when going out (Jeremy et al. 2020).
The rate of unemployment will continue to rise due to coronavirus pandemic. Australian economy fall by 0.5 percent in GDP.
Australia and India macroeconomic policy measures
There is no country that is immune against COVID-19 and no one knows when it will come to an end. Both countries have employed some measures that will aid them to minimize negative impact of COVID-19 on their economy.
The government restricted all travels including domestic travel.
Australia taxation Office (ATO) has created an opportunity for businesses that has been affected by this pandemic to discuss their relief with them. There are various benefits that they are offering such as deferring their interest and penalties that were recorded on or after 23 January 2020 which has already been applied on tax liabilities, and allow the businesss to modify their Pay As You Go (PAYG) instalment to zero (Steven, 2020)
The small businesses is supported by the government by offering them wage subsidies of almost $100,000 and also have access of $20b of government guaranteed unsecure loan (Nicole, 2020).
Australian Chamber of Commerce and Industry (ACCI) proposed a [email protected] initiative that will aid government in supporting businesses to retain their employees during this period of economic deterioration. This measure is available to all businesses that is experiencing reduction in revenue due to direct or indirect impact of COVID-19 (ACCI, 2020).
The pandemic has disrupted supply chain and the demand in India. The government is working on various measures such as fiscal and monetary measures. India is in the process of setting a policy measures which will include cash transfer to casual workers. The Reserve Bank of India (RBI) has employed some measures to to supply more rupees liquidity into their banking system (Saheli, 2020).
RBI has employed a measure that will provide relief on businesses and borrowers. Banks are adviced to lend money instead of depositing in central bank. There will not be an announcement of profit earned from dividends (Remyah, 2020).
Some of the measures that were developed by both countries are succeeding in reducing negative impact caused by COVID-19 pandemic while some does not have immediate effect since people are restricted to movement and low business sentiments.
There is limitations of monetary policy in supply and demand management.
Many businesses are facing challenges in maintaining their employees since business operation has been distracted by COVID-19. Most of the business cannot manage to pay their employees, they are either laying them off or reduce their wages. This will increase the rate of unemployment. Through support by the government, most of the business will be able to retain their employees.
Businesses and borrowers will be able to take loans from bank but they will not be able to invest. The amount borrowed will be used to finance daily operation of the business. Therefore, repayment for the loan after this pandemic will face a big challenge.
Conclusion and Recommendation
Impact of COVID-19 on Australia economy depends on how quicker the virus will be contained. It also depends on how far the government can go or spend to support the economy.
Demand and supply is the most affected. Some industries are most affected than others such as tourism and travel whereby, there are restrictions measures that does not allow people to travel both domestic and internationally due to the spread of the virus. Social distance is a key measure to stop the virus, therefore, customers are staying indoors and as a result, there is decrease in customers spending.
By the end of 2020, Australia GDP will fall by US$ 103 billion. Countries needs to work together in order to reduce the negative on economy (australiascience, 2020)
Future employment depends on the health of professionals. The pandemic can create a high competition on employees in the future if the current one get infected with a virus and cause permanent health problem or death.
The health of the workers needs to be given first priority especially health workers. This can be achieved by developing prevention measures, provide protective materials and train workers on how to prevent themselves and others from contracting the virus.
The education sector is one of the most affected sectors since the foreign students are not able to travel to Australia due to COVID-19. This sector is one of the major contributor to the Australian economy. Education sector will loose about US$7 million by next year (ICEF, 2020).
Students especially Chinese who usually enrol in Australia Universities will opt to join universities in UK or Canada who have not restricted students for travel. Australia can allow the students to come to the country but quarantine and test them to make sure that they are not infected.
Online learning can be employed so that foreign students are able to learn at the same pace with the domestic students. Universities and colleges can develop online classes and share the course schedule with the students. After every lesson, a video of the class is uploaded for those who missed the lecture to catch up.
Government amd banks measures will help to reduce the impacts of COVID-19 on Australia economy. Small businesses will benefit hence, they will not seize their operations due to bankruptcy. Businesses will also be able to borrow loans at low interest rate or unsecured loan.
Australia universities has estimated that more than 21,000 are vulnerable in the next six months which will continue to increase unless the virus is contained (ICEF, 2020).
Most businesses have been affected by COVID-19 and in the next few months, most of them will feel the impact such as shortage of employees, unable to finance their daily business operations, unable to pay employees on time, closer of various outlet locally and internationally. Businesses needs to concentrate on the major part that brings more revenue and pause those activities that contribute less to the company.
Employees needs to continue working during this economic downfall. Businesses can develop a platform that will help employees to work from home. Business productivity will remain stable and the rate of unemployment will not be higher.
An effective fiscal policy can help Australia to improve its performance by 2021. COVID-19 has a negative on Australia imports and exports. The export of goods and services is weak due to travel restrictions and slow growth rate in China.
The Australian government can also use national debt to boost GDP through fiscal packages.
Fighting with invisible enemy is very alarming because it is hard to know when the fight is over. Australia needs to be more careful when determining when the fight with COVID-19 is over. If baba mistake is made, the second wave can hit them hard on their health and economy and will not be able to tackle the issues such as high rate of unemployment, currency will deteriorate, loose skilled employees.
When the time comes to call it off, a lot of things will need to be considered in order to avoid the biggest shortfall in the economy. Measures and policies needs to be developed to prevent more harm. The government and other organisations needs to be 100 per cent sure that the virus is 100 per cent contained and there is and will be no chances of spreading the virus.
References
ABS (2019) 5206.0 – Australian National Accounts: National Income, Expenditure and Product, Dec 2019 retrieved from https://www.abs.gov.au/ausstats/[email protected]/mf/5206.0
ABS (2019) 6401.0 – Consumer Price Index, Australia, Dec 2019 Quality retrieved from https://www.abs.gov.au/ausstats/[email protected]/mf/6401.0
ABS (2019) 6202.0 – Labour Force, Australia, Mar 2020 retrieved from https://www.abs.gov.au/ausstats/[email protected]/mf/6202.0
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