Will the Australian Economy recover post Covid-19?
Every passing day the number of cases of Covid-19 is rising and this is still a developing story. Medical experts are still struggling to understand the true nature of the virus as it continues to ravage both economy and public health.
As mentioned above we are still in the early stage of this pandemic because it is still spreading and its implications are still emerging. We are far from measuring the full economic impact of this pandemic. IMF has reiterated twice that it fears that the coming economic crisis is going to be worse than the Great Depression. Many countries are now beginning to ease their lockdowns but the damage has been done.
1. What do we need to Understand?
The pandemic has created a unique situation in the world that many of us weren’t prepared for. The real problem has been about the lack of understanding of the effects of this pandemic. What we need to understand that the virus firstly is real. Yes there are a lot of conspiracy theories in circulation and some of them may even be true but there is one thing for certain. The virus is killing people both young and old are getting infected by it. The deaths that have happened so far, most of these people were healthy individuals who would have been alive had the virus not infected them, this is a basic underlying fact.
Now, even if the lockdowns are eased or completely lifted, this won’t mean that the virus has ended. There is to date no vaccine for the virus. So we must remember that at least for the next one or two years we are going to live constantly in the shadow of this virus. Even if business opens, things will not go back to the way they were. All of us have a responsibility to save ourselves and our loved ones.
Having said this, life must go on. Lockdowns are not the solution here. No one knows how long it may take to find the vaccine and then administer it globally and therefore it is impractical to keep business and economy locked down for that long.
It is therefore understood that economies will open and lockdowns will ease but the way of working is soon going to change. The narrative that is building across the world right now is that we need to change the whole way we used to operate. Innovators and thought leaders are talking about global disruption to bring about global transition.
2. Education sector: How badly has it been hit and is there any hope?
There are discussions going on about how to reopen schools and universities, as these places deal with a large number of students. Implementing SOPs may not be very easy in such places. Therefore simply reopening the schools and universities won’t be enough. Something innovative will have to be done to make sure that academic process resumes without endangering the lives of both teachers and the students.
The education sector in Australia is set to be hit the worst because firstly around the world this sector has been hit the hardest and secondly majority of the overseas students in Australia came from China and with travel restrictions in place, the number of overseas students for the new semester may drop significantly. According to the Guardian the Australian universities are looking to axe 21000 workers in the next six months if the relief package for the universities isn’t expanded as the current package isn’t enough.
Reliance on Globalisation
The problem here is that Australia like many other economies relied too much on globalisation. Covid-19 has for the moment halted globalisation and therefore countries that relied on globalisation, on the free movement of trade and people have been hit the hardest.
Unless the Australian universities find an innovative way to resume education without actually having the overseas students travel to Australia, there is no way how the universities especially can continue like before. Even if they reopen the travel restrictions will mean that the overseas students will not be able to join and this will dent the funding significantly. Australia however is not alone in this as UK also has a similar problem.
UK has an overwhelming number of overseas students from China, and other South Asian states and travel restrictions will simply mean that the universities are going to suffer a lot financially in the coming months. Unless a clearly defined strategy is developed, it is going o be very difficult for the education sector to recover from this crisis.
3. Tourism sector: How badly has it been hit and is there any hope.
Globally, tourism is among the worst hit sectors due to Covid-19 pandemic. Australia relied significantly on its tourism. While a very high number of tourists came from China but Australia also catered to tourists from every other place in the world. Australia was a poplar stop for cruise ship tourism. At present the tourism industry has gone into deep hibernation and it isn’t even in the priority list to reopen. By February the tourism sector had already lost AUD 4.5 billion.
4. What is the Government thinking?
The Australian government is in a dilemma like almost every other government. What to do next? So far it seems that the government has put its ideology aside and is tackling the problem on war footings. The relief payments have been significant so far but the damage to the economy is also of enormous proportions. Unemployment in Australia is spiking. The cues outside Centrelink offices in Sydney alone extend to several blocks. The government has to focus not only on providing continuous relief to those who have been affected but also make sure that the economy isn’t damaged beyond the point of no return.
So far it seems that the approach of Australian government is similar to that of the UK. The economy has essentially been put into hibernation with communication lines between employers and employees open. Only essential services are the focus of attention right now.
In such a situation “bouncing back” may not be possible in the future as there will be nothing to bounce on. At this point the question isn’t even that how quickly will the economy recover. The real question is that how will the future economy look like because as we go through the transformation a lot of things will change.
For now the manufacturing and services sector of Australia should brace for impact because global trade is expected to remain in contraction and since Australia relies heavily on trade, the impact won’t be good. The strength however of the Australian economy is in its indigenous nature. Australian economy is almost self made. Yes it relies a lot on trade but if trade goes down then still the economy has got all the fundamentals in place to regain its footing and continue in a more isolated manner.
The key to surviving the coming economic recession for Australia is going to be introspection. The economy will need to look inside to fulfil its demand and rise again instead of looking outside at global trade. Australian economy is well diversified in terms of the development of its sectors but it will need to shift its focus from trade to domestic consumption at least for the short term.