Economies On COVID-19 Fight, Will Their Measures Suffice?

With the pandemic engulfing us alike in its treacherous realm, we wake up to notifications of increased COVID 19 confirmed numbers and the World Health Organisation (WHO) guidance on our Instagram feed. The coffee is still a constant, or so we hope (thank God for essential supplies!), but it does not seem as relaxing as it used to- does it?

COVID 19- The Invisible Enemy

The novel coronavirus attack has been relentless in every continent of the world. As per the WHO situation dashboard, on 21 April 2020, there are 2.3 million confirmed virus cases and the death toll has surpassed 157k in 213 affected countries.

The virus has plagued livelihoods, forcing several countries around the world to practice social distancing and lockdown rules with immediate effect. Consequently, businesses have been hit hard, manufacturing and trade is at zilch progress and health hazards are on high risks. The global aim currently remains the same- stop the wave of devastation, better being referred as flattening the curve.

Three Countries in Discussion- The US, Australia & New Zealand

The novel coronavirus, with its epicenter in Wuhan City of China in December 2019, has spread to every continent since then. What remains a topic of worry is that there is no single robust cure/ medicine that can battle the virus. However, pre-clinical and clinical trials have been ramping up across the world and the hope lies strong that a cure will soon be available to curb and eventually eradicate the virus.

Meanwhile, countries across the world have been adhering to government mandates of lockdowns, minimum movement with only essential works to contain the spread of the virus. Organisations and hospitals have been educating masses to practice anti-viral exposure measures.

In this backdrop, let us understand the COVID 19 situation in 3 impacted countries-

The USA- World’s Biggest Economy Fighting COVID 19 With Maximum Cases

The US has had by far the world's largest number of confirmed cases of COVID-19. Across all 50 states, the widening virus outbreak has claimed over 40k lives.

In response, the U.S. has implemented a range of measures including travel restrictions, social distancing, declaration of states of emergency, closure of schools, bars and restaurants, and increased testing. According to a Johns Hopkins dashboard, the total number of testing in the US has surpassed 4 million (as on 21 April 2020).

Currently, there have been cases of protests to lift the lockdown as the economy seems to be dwindling, though medical experts are suggesting otherwise, prioritising the hazards of the virus and warning that more testing is needed before considering loosening of restrictions.

So, how does the US plan to be up in the game and bolster its economy amid and post the virus?

Measures Taken by the USA

The Government announced an estimated US $2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy Security Act (“CARES Act”). This was in addition to the US $8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and US $192 billion Families First Coronavirus Response Act.

Federal funds rate were lowered by 150bp in March to 0-0.25bp and new facilities to support the flow of credit were introduced.

In more recent affairs, President Donald Trump reportedly has plans to suspend immigration to protect American jobs after the country recorded worrisome layoffs in millions. Mr Trump indicated a temporary suspension of immigration into the country with the aim to limit the virus spread besides safeguarding American jobs.

Australia- Efforts to Contain the Virus have Stepped up, Says Governor Lowe

In a speech dated 21 April 2020, RBA’s Governor Philip Lowe stated that as a country Australia has been up to the task of building a bridge to the recovery and helping as many people and businesses as possible get across that bridge.

With a little over 6k cases and 71 deaths, the country might have few difficult days ahead, but is placed to recover from the economic hit, added Mr Lowe.

According to PM Scott Morrison’s address dated 21 April 2020, Australia is currently evaluating approximately 92 per cent of all symptomatic cases, while each state and territory individually detecting at least 80 per cent.

Measures Taken by Australia

Three economic stimulus packages were launched at the Commonwealth level, with total expenditure and revenue measures of $194 billion (9.9% of GDP) through FY2023-24, the majority of which to be executed in FY2019-20 and FY2020-21. An extra $5 billion will be spent to strengthen the health system and protect the vulnerable people.

Besides this, state and territory governments have announced fiscal stimulus packages amounting to almost $11.5 billion.

The policy rate was cut by 25 basis points twice on March 3 and 19, to 0.25% and banks were directed by the APRA to utilize some of their current large buffers to facilitate ongoing lending to the economy as long as minimum capital requirements are met.

More recently, in his address dated 21 April 2020, PM Morrison intimated that the National Cabinet has commenced further work on Australia’s public health response including enhanced testing, tracing and local health response capabilities, which will be instrumental to review lifting restrictions by 14 May 2020.

Moreover, the personnel protective equipment (PPE) in the National Medical Stockpile, and PPE held by state and territory health systems are now largely sufficient to meet expected demand for Australia’s COVID19 response through to December 2020, with current social distancing and travel restriction measures in place.

New Zealand- Demonstrator of National Unity

Besides COVID-19, NZ PM Jacinda Ardern has been the center of media attention for her crisis leadership skills and strong command of the issues, along with humane, firm and consistent messaging.

New Zealanders adhered to restrictions on their liberties and customs. The daily numbers of new reported cases peaked at 89 on April 5 and have declined since and active cases continue to plummet, with health system overload averted.

Measures Taken by New Zealand

The government has announced fiscal measures amounting to a total of NZ $23 billion (7.7% of GDP), more than half to be disbursed by end-June 2020. The RBNZ cut the OCR by 75 basis points to 0.25%, to remain so for at least 12 months. A number of financial measures to support SMEs and homeowners have been undertaken.

Moreover, the ‘no-cap’ wage subsidy scheme is expected to inject NZ $4 billion into the economy over the next three months.

Director-General of Health Ashley Bloomfield stated that the country is past the peak of coronavirus cases, indicating that the worst is over, thanks to the implementation of radical measures lockdown and medical measures and maintaining a ‘low threshold’ to ensure that anyone with even the low-level of respiratory symptoms also gets tested.

Even while economies show slight signs of relief, economic uncertainties continue to hover around the financial health and survival of the businesses and the outlook remains bleak and unpredictable currently. Flattening of the curve should remain top priority.