Impact of COVID-19 on Australian Economy

This article discusses the impact of COVID-19 on the Australian economy. It covers concepts of scarcity, trade-offs, and opportunity cost. It also explores the Australian government's policies on quarantine and social distancing, as well as the variables of GDP growth rates, inflation, and unemployment. Additionally, it provides an overview of the economic policies implemented by the Australian government. References are included for further reading.

Impact of COVID-19 on
Australian Economy

Contents
Overview...............................................................................................................................................3
1. Evaluating concepts of scarcity, trade - offs and opportunity cost.....................................................3
2. Australian government policies of quarantine and social distancing affecting economy..................4
3. Australian economy depicting variables GDP growth rates, Inflation and Unemployment...............4
4. Economic policies implemented by Australian government..............................................................8
REFERENCES....................................................................................................................................10

Overview
COVID – 19 is an abbreviation of a disease which is caused by a new type of
coronavirus. Basically COVID – 19 is abbreviated from 'CO' which means corona, 'VI' stands
for virus, and 'D' for the disease. This disease was formerly referred to as '2019 novel
coronavirus' or '2019 – nCoV’. The COVID - 19 pandemic has created huge loss resulting in
global economic shock having unprecedented proportions.
1. Evaluating concepts of scarcity, trade - offs and opportunity cost.
Because of such evolving uncertainty as arises due to the coronavirus (COVID-19)
pandemic, it has created a negative impact on the Australian economy too. Also, many small
scale companies and businesses had been affected in an unprecedented manner. For better
understanding of economic crises under which Australia is going through, concepts of
scarcity, trade - offs and opportunity cost are better sources.
Scarcity – Due to COVID – 19 pandemic, shortage of resources has been started in
Australian economy creating problem of proper and efficient allocation of scarce resources.
Because of lockdown and social distancing concept, shortage of supply as compared demand
has started thus resulting in gap between limited means and unlimited wants in the economy
(Chang and et.al., 2020). For mitigating resource scarcity in form of food, raw materials etc.
the Australian government needs to focus on economic growth and focus on managing
resource usage wisely.
Trade offs – It comes up with sacrifices which every economy has to make so as to
obtain desired goals. . By making clear understanding of trade off concept by the Australian
government related to every decision, it has helped in ensuring resources are being used
wisely to cope up with such epidemic situation. Also, it will help economy in making
consistent strategy for making better decision by emphasizing on particular strategic priority
of long term nature i.e. COVID – 19.
Opportunity cost – By analysing current situation, the Australian government has
emphasizes on its opportunity cost so as to maintain smooth relationship in between scarcity
and choice. Australian Government has budgeted an amount of $200 billion for dealing with
coronavirus crisis for free childcare and additional health system.

2. Australian government policies of quarantine and social distancing affecting
economy.
Due to COVD – 19 pandemic, the economy of Australia is bearing heavy economic
cost so as to slow down coronavirus spread. Most of the businesses are shut down with large
number of people being unemployed. Governments in most of the countries affected are
trying to make balance between minimising human occurs due to coronavirus outbreak and
economic damage created on huge level.
Regulatory framework has been made depicting about Quarantine and Social
distancing policies. This policy has been implemented with the aim of minimizing the spread
of infection among the country (Anderson and et.al., 2020). Many industrial sectors have
facing downfall in their productivity as well as profitability aspect from last quarter.
Following are some measures which resulted from the policies laid down by the
government of Australia:
1. Has resulted in closure of educational institutions, schools, colleges.
2. Workplace closure is one of the most important factors as a result of which overall
productivity and profitability has decline. It thus results in falling of GDP rate of
Australia.
3. Banning and cancelling mass gathering has resulted in downfall in business graph
of event organiser and also encourages unemployment to some extent.
4. Restrictive social distancing measures carry short and medium term financial
burdens on people and reduces their purchasing power.
5. Restriction on travelling has decline the profitability aspect of Hospitality and
Tourism Industry too.
3. Australian economy depicting variables GDP growth rates, Inflation and
Unemployment.
 GDP growth rates

Years
GDP
growth
rate (in %)
2001 1.93%
2002 4.00%
2003 2.99%
2004 4.06%
2005 3.20%
2006 2.80%
2007 3.84%
2008 3.66%
2009 1.88%
2010 2.36%
2011 2.84%
2012 3.80%
2013 2.13%
2014 2.58%
2015 2.31%
2016 2.78%
2017 2.46%
2018 2.73%
2019 1.85%
The impact of COVID-19 on Australia’s economy shows contraction of up to 15 percent of
GDP. It thus requires government expenditure of at least $300 billion so as to mitigate pandemic in

areas of labour market, consumption and investment (MacIntyre, 2020). The Australian economy
could be recovered and continue to grow at its trend rate in relatively quick manner in such global
financial crisis because of large increase in government spending.
 Inflation rates
Years Inflation
rate (in %)
2001 4.40%
2002 2.98%
2003 2.73%
2004 2.28%
2005 2.72%
2006 3.52%
2007 2.36%
2008 4.35%
2009 1.77%
2010 2.86%
2011 3.33%
2012 1.71%
2013 2.48%
2014 2.49%
2015 1.49%
2016 1.28%
2017 1.97%
2018 1.93%
2019 1.61%

The Commonwealth Government announced stimulus package estimated around $11 billion.
It will cover measures related to increment in healthcare services, relief from tax, wage subsidies,
payments in cash for businesses and cash bonuses for the welfare recipients. Such fiscal injection in
collaboration with monetary easing by the Reserve Bank of Australia will help in softening adverse
market conditions in Australia.
 Unemployment rates
Years Unemployment
rate (in %)
2001 6.74%
2002 6.37%
2003 5.93%
2004 5.40%
2005 5.03%
2006 4.78%
2007 4.37%
2008 4.23%
2009 5.56%
2010 5.21%
2011 5.08%
2012 5.22%
2013 5.66%

2014 6.07%
2015 6.05%
2016 5.71%
2017 5.59%
2018 5.30%
2019 5.18%
With the crisis of COVID – 19, almost every economy across the globe is facing
serious downfall as compared to previous year. As per the estimate made by the new
Treasury figures, the rate of jobless people will double in the June quarter i.e. 5.1 per cent to
10 per cent. It can result in recession phase which Australia will enter while dealing with the
COVID-19 pandemic (McKibbin and Fernando, 2020). The rate of unemployment has hit
with double number since April 1994 which is a fraction below Australia's peak
unemployment rate of 11.2 per cent in 1992. Also, it has been estimated by Treasury that the
rate of unemployment could be at peak of 15 per cent, if the Government has not come up
with $130 billion for JobKeeper i.e. wage subsidy program.
4. Economic policies implemented by Australian government.
Current pandemic crisis is challenging all governments to implement monetary and
fiscal policies to assist credit markets with sustainment of economic activity. The Australian
government has implemented some economic policies so as to mitigate the consequences of
the COVID - 19 pandemic viz.
1. It has announced a stimulus package of AU$17.6 billion ($11.4 billion) on March
12, 2020 which will includes assistance for business investment, cash flow
support for small and medium sized business & its employees, other household
stimulus payments.
2. The Australian Securities and Investments Commission make orders on March 16,
2020 for reduction of number of executed trades by large equity market
participants by 25% from the levels as provided on March 13, 2020 till further
notice is made (Moss and et.al., 2020).
3. Government has declared that the Australian Office of Financial Management
(AOFM) will be provided with investment capacity of $15 billion so as to enable
smaller lenders to make continue supports to all Australian consumers and small
businesses on March 19, 2020. Also, AOFM ensures that it will be able to

purchase residential mortgage backed securities and makes investment in wide
range of other asset backed securities with proper warehouse facilities for coming
next 12 months.
4. Declaration has been made on March 22, 2020 related to fiscal package of
AU$66.4 billion ($38.5 billion). It will help in extending aspects related to income
support for all existing welfare and newly unemployed workers. Also, it will boost
all business related measures i.e. cash flow, wage subsidies etc. which has been
previously announced.
5. The government expects AU$100,000 to be given to local businesses if company
has turnover of less than AU$50 million each year (Global Economic Effects of
COVID-19, 2020). Also, it will underwrite 50% of up AU$40 billion in loans as
offered by the local lenders to all small and medium sized business firms.
6. Disclosure of economic package of AU$130 billion ($79.85 billion) by the
Australian government has been done on March 30, 2020 so as to subsidize wages
of estimated 6 million people (Nicola and et.al., 2020). It has been marked as third
tranche of stimulus as designed to control COVID-19 pandemic breakout on the
economy of country.
7. Any company which has lost 30% of its revenue can apply for funds under job
keeper allowance. It would bring COVID – 19 stimulus near to A$320 billion i.e.
approximately 15% of Australia’s gross domestic product. It means this will
provide all eligible companies with an amount of AU$1,500 every fortnight for a
period of six months for its each employee.

REFERENCES
Books and Journals
Anderson, R. M. and et.al., 2020. How will country-based mitigation measures influence the
course of the COVID-19 epidemic?. The Lancet, 395(10228), pp.931-934.
Chang, S. L. and et.al., 2020. Modelling transmission and control of the COVID-19 pandemic
in Australia. arXiv preprint arXiv:2003.10218.
MacIntyre, C. R., 2020. Global spread of COVID-19 and pandemic potential. Global
Biosecurity. 1(3).
McKibbin, W. and Fernando, R., 2020. 3 The economic impact of COVID-19. Economics in
the Time of COVID-19, p.45.
Moss, R. and et.al., 2020. Modelling the impact of COVID-19 in Australia to inform
transmission reducing measures and health system preparedness. medRxiv.
Nicola, M. and et.al., 2020. The Socio-Economic Implications of the Coronavirus and
COVID-19 Pandemic: A Review. International Journal of Surgery.
Online
Global Economic Effects of COVID-19. 2020. [Online]. Available through: <
https://fas.org/sgp/crs/row/R46270.pdf >.
Unemployment rate predicted to reach 10 per cent amid coronavirus pandemic, pushing
Australia into recession. 2020. [Online]. Available through: <
https://www.abc.net.au/news/2020-04-13/coronavirus-unemployment-covid-19-treasury-
figures-jobless-rate/12145542>.