Australia is well positioned to make a speedy economic recovery, but must tread carefully in the coming weeks according to the Business Council of Australia.
Modelling of the coronavirus’ economic impacts by the Business Council shows Australia can achieve a quick, ‘V-shaped’ economic recovery – rapidly recouping some of the losses the nation has endured to date.
But to do so, government will need to act quickly and responsibly to unwind restrictions without compromising Australians’ health.
“There can be no trade-off between the health, social and economic recovery but the most vulnerable members of our community will pay the highest cost of failure on any front,” Business Council chief executive Jennifer Westacott said.
“The economic cost has been profound, but Australia is well placed to recover strongly with a plan to continue managing the virus, keep Australians safe and lift restrictions where possible.”
Just how quickly the economy recovers will depend on how long the current set of coronavirus restrictions remain in place.
The Business Council’s modelling shows removing restrictions faster will result in a speedier recovery.
But even with the full suite of restrictions in place for three months, Australia will quickly bounce back.
The modelling comes as New South Wales, Western Australia and the Northern Territory begin unwinding some of the measures introduced to slow the spread of the deadly disease.
Ms Westacott said government must focus its efforts on job creation – especially for older workers and Australians with only a high school or below education.
This means creating a system to help workers “rapidly upskill as the world changes” while supporting tax and legal reforms to make it easier for employers to put on staff.
Specifically, Ms Westacott said government needs to change Australian tax rates to make them more competitive with foreign countries to attract foreign investors.
Australia could miss ‘technical’ recession
Scott Haslem, chief investment officer of Crestone Wealth Management, agreed the evidence points towards a painful but quick downturn rather than a “garden variety” recession that plays out over a year or two.
“Assuming recent evidence that the virus is contained in Australia, and there is a gradual return to work through late [quarter 2], this is likely to be a short, sharp downturn,” he said.
Australia could even avoid meeting the technical definition of a recession – two consecutive quarters of negative GDP growth – too.
But Mr Haslem warned that doesn’t mean the country isn’t really in the grips of a recession.
Instead, the spike in grocery shopping caused by coronavirus panic-buying will have thrown out the country’s GDP figures by effectively bringing forward weeks (or even months) of grocery shopping into a shorter period.
“Other less-popular definitions focus on the change in the unemployment rate,” Mr Haslem said.
“More recent data suggests strongly that the unemployment rate is going to jump over 5 per cent (to 10 per cent) in the next few months, and more than a million workers may have lost their jobs.
“As Reserve Bank of Australia Governor Lowe noted yesterday, Australia will likely drop 10 per cent of its growth in the first half of 2020, mostly in quarter 2. That’s a recession in anyone’s language.”