Coronavirus (COVID-19) and its Impact on the Australian Economy

Posted by Maria Katrina dela Cruz

Mar 31, 2020 4:06:30 PM

As the pandemic cripples the business sector, the global economy now hangs by a thread. Operations are on halt and industry recessions are expected to happen, making Coronavirus a disruption causing a significant impact on the economy.

coronavirus impact on the economy

Related: Reshaping Outcomes: Getting Back Up from the COVID-19 Pandemic 

For the longest run, Australia has been an exemplary country in sustaining a steady economy. But with the alarming spread of the Coronavirus, small businesses are shifting their game plans to survive. Economists have also forecasted contraction that can potentially last until the 3rd quarter of 2020.

  • Employment 

Like the majority of the countries grappling to contain the pandemic, Australia also faces the employment consequences of the Coronavirus disease or COVID-19. 

Closure of businesses and social distancing were mandated by the Australian government in an effort to protect the people. Unemployment cases are expected to rise from 5.3% to 6.25% by the year’s end which is forecasted to significantly impact the country’s GDP.

As businesses are currently on hold, thousands of employees are now experiencing disruptions on their end. Aside from the loss of income, unemployment also poses an added risk for the already weakening economy. Declining employment rates mean higher household debt that puts employees in a more vulnerable situation. A record-high 186.5% debt to household income only echoes a big risk in the increase of unemployment.

 

  • Businesses 

As Australia is plummeting towards economic recession, businesses are preparing to respond to the crisis in a proactive manner. 

It is said that 90% of companies are to feel the pressure of the pandemic in a matter of 4 months. Adverse impacts are evident in accommodation and food services as 78% of them have already reported radical changes in their workplace and 96% expecting a downturn in the coming months.

The Australian government is putting all necessary backup measures in place to prepare for the impending recession. For small businesses, a pledge amounting to A$100,000 is made as payments for retaining their labor force in the duration of the crisis. A one-off payment of A$750 will also be given to 6.5 million Australians receiving government assistance.  

To further help firms in these trying times, a stimulus package of $189 billion is pledged to prevent the business landscape from completely going down. Australia has also provided small business grants to help firms stay afloat and keep people employed amid the pandemic. 

Among the small business grants given are:

  • Waived payroll tax
  • Deferred payroll tax
  • Waived license fees
  • Interest-free loans
  • Deferred commercial tenancies
  • Business support fund
  • Diversification grants

 

  • Economy

Having a quick recovery from the COVID-19 is highly unlikely to happen. As many economists predict, the economic downturn this 2020 is one that will wreak havoc on businesses and livelihoods and can potentially pipe down during the last quarter of the year.  

There is a build-up of panic in the financial market as the pandemic fuels global economic disruption. According to a PwC study, Australia's GDP can reduce to $34.2 billion over the year. This is possible, given that the spread of the pandemic has reached both ends of the world. More stringent mitigation is needed to contain the virus and slow down its economic impact globally and domestically. 

As a response, the government allocated $320 billion to represent the fiscal and balance sheet support across the budget projection of 16.4% of the annual GDP. This aims to give assistance to businesses and households throughout the prolonged impact of this black swan scenario.

Aside from providing the necessary support to the workers and companies, the package also puts the Australian economy to recover strongly once the pandemic subsides. 

The Coronavirus’ impact on the economy puts companies’ resilience to test. Once everything is business as usual, it would be best to revisit your continuity and recovery strategies to better prepare the business in the coming years.

 

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Topics: Financial News and Politics

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