Australia gets rekt by the IMF as they predict how the economy would reduce by 6.7% this year, while unemployment would average 7.6 %. With the rest of the world by our side, the IMF further predicts that the state of the global economy isn’t exactly peachy either. With a decrease of 3%, this contraction is far worse than that of the GFC. Optimistically speaking, if the pandemic eases up through the second half of 2020, the global economy is estimated to partially revive itself in 2021 by 5.8%. Being in early April, doesn’t allow the IMF to predict the future of the coronavirus’s long term impact on the global economy, but necessary measures to reduce contagion and protect lives will take a short-term toll on economic activity.
As we continue deeper into lockdown measures, more and more Australians find themselves jobless or seeking their way into the category of the ‘underemployed’. The unemployment and underemployment rate both increased by 0.1% to 8.7% and 13.9%, respectively. Australia’s seasonally adjusted unemployment rate increased to 5.2% (March 2020) from 5.1% (February 2020) and below market expectations of 5.5%. Keep in mind that the ABS’s reference covered the first half of March only, and hence does not fully reflect the impacts of lockdown due to the coronavirus. Nonetheless, with around 32% of Australians renting their homes, Scott Morrison encourages tenants and landlords to compromise on an agreement to “get through this crisis”.
Government intervention for rent relief includes; an eviction freeze and rental assistance. For example, Queensland is offering a one-off payment of up to $2,000, to eligible tenants, being paid directly as rent assistance. Additional measures should be rolling out soon as more property data rolls in.
Trying to steer away from unemployment, to maintaining the employed: The provision of $165m in extra funding to Qantas and Virgin Australia, was implemented because a strong domestic aviation network was “critical to Australia’s success”. The new funding comes on top of about $1bn in earlier pledges for the aviation sector, including $298m to keep regional airlines operating. This injection of funds aims to boost productivity and efficiency, by securing affordable access for essential workers. During this pandemic, it allows for job training to seek higher wages, individuals are more likely to execute their essential work, and have a beneficial ripple impact on the rest of society.
The ASX 200 climbed 5.9% last week on the back of Australia’s decreasing infection rate, hopeful investor sentiment towards a vaccine and a lower than expected domestic unemployment rate. Interestingly, the market did not seem greatly affected by China’s year on year quarterly GDP being 6.8% lower, this is their first decline in GDP since 1992.
The Australian economy continues to get roasted, this time by Scott Morrison himself, as he says how the coronavirus has hit the economy “like a truck” and hence has “taken the biggest hit since the Great Depression”. In response to this, the Morrison government attempts to combat the decline of growth through company tax breaks, deregulation and wide-scale industrial relations. Tax rates want to be kept as low as possible while not wanting to increase that it creates a burden, all while funding essential services. Finding that sweet spot will help to “pursue a stronger economy”, says the Morrison government.
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