by Duncan Murray, Yang Guo
SYDNEY, April 16 (Xinhua) -- Once known for its robustness during a crisis, the Australian economy now faces the same prolonged negative growth as many other countries due to the ongoing COVID-19 pandemic.
Having gone almost 30 years without a recession, enduring the global financial crisis of 2008, the Asian financial crisis in 1997 and other challenges before them, the combined effects of a summer of bushfires and nationwide lockdown have brought the streak to an end.
However, the country's leaders are hoping that with relatively low infection rates so far, after a brief "hibernation" the economy will rebound once the pandemic passes, with the help of carefully directed stimulus.
Earlier in the week, a global outlook by the International Monetary Fund (IMF) ranked Australia as likely to be among the worst hit countries in the Asian region, with the economy shrinking by 6.7 percent in 2020, while leading forecaster BIS Oxford Economics predicted an even heavier 7.7 percent contraction.
In 2021, the IMF expects Australia's GDP to grow by 6.1 percent as the world snaps back from lockdown, however, the road to recovery is deeply uncertain and relies heavily on a measured government response, to an unprecedented set of circumstances.
Chief economist at BIS Oxford, Sarah Hunter told Xinhua that like other countries Australia's shrinking economy was a direct result of restrictions on everyday activity and international travel put in place to tackle COVID-19.
"Like all economies, Australia is very likely now in a recession as a result of the restrictions put in place to tackle the coronavirus pandemic," she said.
The immediate impact on Aussies has been immense, with the closure of restaurants and bars leaving hundreds of thousands without work and key industries such as tourism and education temporarily deserted due to a strict closed border policy.
The response by the government, led by Prime Minister Scott Morrison, involved the biggest stimulus payout in the country's history, including a 130 billion Australian dollar (81.8 billion U.S. dollar) wage subsidy program aimed at maintaining ties between businesses and workers.
Dubbed the "JobKeeper" program, around six million workers will receive a fortnightly payment through their employers rather than via conventional welfare channels, with the intention of keeping employees on the books to streamline the reopening process once the pandemic passes.
"To keep people formally employed and connected with the business they work for is key to enabling as rapid a recovery as possible once the restrictions can be lifted," Hunter said.
"The experience in previous downturns clearly highlights this, with the labor market typically taking a long time to recover and return to full employment. So preventing the initial increase in the number of people unemployed should be very effective at stimulating the recovery."
Senior lecturer in political economy at the University of Sydney, Gareth Bryant agreed that the program is by and large a good one but says that it could go even further to support those who missed out, including students, migrant workers, short-term casuals, artists and others, who he says could be included for a nominal increase to the cost of the scheme.
"The private sector is not going to lead this recovery, it's up to the government to invest in infrastructure and services that will keep people employed and create new jobs," Bryant told Xinhua.
Another factor which may help Australia achieve a strong economic recovery is the relatively small impact which the virus has had within the country so far. Australia's rate of infections slowed dramatically shortly after reaching 6,000 confirmed cases, as social isolation and distancing laws came into effect.
Bryant said that the strict measures taken to stop COVID-19 may be behind the IMF's unflattering short term predictions, but may also give the country an advantage when it comes to the recovery, a theory backed up by looking at the experiences of past pandemics.
"Those countries that do take that decision to close down parts of the economy are more likely to see sharp declines in the shorter term but it remains to see whether those decisions do pay off economically in the longer term," Bryant said.
While an historically resilient Australia looks for an exit to the downturn, Bryant points out that even before the bushfires and COVID-19 pandemic, the country's economy was not in the best shape.
"Part of it was the bushfires and pandemic, but it's also important to remember that even before the bushfire crisis the Australian economy was showing signs of weakness," Bryant said.
Compared to the historic stimulus programs brought in to fight COVID-19, before the pandemic the Australian government was ignoring calls from the country's central bank to use fiscal policy to increase demand in the economy.
While the government's financial packages are now the largest the country has ever seen, and most agree that the economy will eventually return to normal, just how long that will take is anyone's guess.
"In general we expect the economy to rebound, and regain the majority of the activity that is currently 'lost' as a result of the restrictions on activity," Hunter said.
"But we expect the recovery to take some time, and so to be somewhat U-shaped rather than V-shaped." Enditem
