Australia seems to have made significant progress on the novel coronavirus. Affirming this, PM Scott Morrison stated that “we’re winning, but we have not won”. The Asia-Pacific country may have succeeded in containing the invisible enemy to a large extent, but what about the economic repercussions? Is it time for Australia to jump through the Global Virus Crisis hoops and reopen its economy?
GVC Aftermath #1- Lost Jobs
As COVID 19 engulfs economies into its treacherous realms, including Australia, the Morrison government has been stating since the outbreak that the Global Virus Crisis, as experts are calling the pandemic period, has to be fought on two fronts- to fight the virus and to fight the economic devastation that it brings.
14 May 2020 is what PM Morrison called a “very tough day” for Australia. This was the day when he conferred that the country has lost over 600k jobs- a terribly shocking figure, but not unanticipated. The Government did put in place the economic support and lifelines that would be needed, and at record levels. For instance, the expansion of JobSeeker to support those who could not stay with their employers was exercised. Besides this, the JobKeeper program continues to help those who seek unemployment support and keep Australians in their jobs.
However, despite this, a weighty economic blow has been felt with so many jobs lost, devastating Australians, their families, and their communities. PM Morrison stated that job support programs were put in place in anticipation of this day as the Government did forecast that it would come, and it is a worrisome fact that there could be more that follow.
Let us look at some numbers, as highlighted by Treasurer Josh Frydenberg MP-
GVC Aftermath #2- Limits to Fed & Banking Support
With Australians flattening that curve very successfully, supports have been in place- both the health supports and the economic supports to help Australians through this very difficult time. Australia’s banking system has tackled the volatile environment well, but one must remain mindful that shock absorbers in the financial system- be it the form of federal supports and other supports, or banking system, have certain limits.
They are not “endless” and have their own “capacities”, says PM Morrison. Banks have deferred repayments on $220 billion of loans and, 7.7 million people are being paid government welfare, which is bound to put pressure on the Australian economy. Moreover, insolvencies are presently running at below-average levels.
It is but obvious that the Government and financial institutions cannot maintain extraordinary support measures indefinitely. Maybe this is why PM Morrison stressed on the fact that the “the clock is ticking” when it comes to how far and how much can be done, and the economy must reopen soon to get people back in jobs, support businesses to make Australia a stronger economy.
Australia’s Route to Reopen Economy
There have been more than 7k confirmed COVID 19 cases in Australia with 98 deaths. As on 15 May 2020, there were less than 1k active cases in Australia with low rates of daily infection over the week. Testing remains top-notch and rapid, with more than 950k tests undertaken.
With Australia so far being highly successful in flattening the curve, the National Cabinet has finalised a three-step plan to gradually remove baseline restrictions and make Australia COVID-safe, with a goal to have a sustainable COVID safe Australia in July 2020-
Under the three-step plan to economically and recreationally reopen Australia, states and territories continue to make decisions to their individual circumstances and local conditions. Jurisdictions possibly will ease restrictions at a diverse pace. The National Cabinet affirmed that regular reviews and stocktake assessments of progresses will occur every three weeks.
Note: Australia’s retail has already begun to re-start its course. Businesses and cafes are likely to be opened up on the weekend of 16 May. Schools are planning their reopening course in a safe and measured way. States are allowing limited guests visits at home.
Optimistic Indicators in Australia as it Braces to Reopen Economy
Australia’s response to the coronavirus has been on a positive trajectory, as inferred from the Government’s confidence on the decision of easing restrictions in the coming months in a measured way to get the economy moving and creating a COVID-Safe environment.
PM Morrison states that after flattening the curve in what he calls the “post-war era”, the subsequent task is to reset the economy for growth and support Australians and their livelihoods. While financial markets seem to be returning to stability in a fragile way, they are still functional.
Australia’s superannuation system with some $11.7 billion in claims seems to be responding well. $90.1 billion in Australian government securities has been reportedly raised (since 20 March 2020), along with $33 billion in T-notes and $56.6 billion on bonds. The latest $19 billion at 1%, was oversubscribed as well.
Seeing its ability to raise this finance to ensure that the nation can provide necessary economic supports and lifeline to the Australian economy, global markets are considering Australia as a good bet in this uncertain time.
Moreover, as the borders fall internally, tourism can gradually pick up, especially with school holidays coming up again in July. It should be noted here the net tourism imports to the country is more than $20 billion in a year. Also, tourism is a prospective and vital employer, particularly in regional areas of the country.
Further, Mr Frydenberg believes that ~850k citizens will be back in work with stage 1, 2 and 3 restrictions being lifted. This translates into the economy to be better off by 9.4 billion dollars a month.
Australia has shown resilience to bounce back, to recover, to work in the past. Though the COVID 19 situation is perhaps the most difficult phase economically in the longest fathomable history, Australians and the Government seem confident to sail through the tough tide, with their ingenuity and hard work, as the economy gears to reopen in the coming weeks, prudently and attentively.