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Essay on mitigating the effects of COVID-19 - Australia

At the beginning of 2020, a new virus called COVID-19 invaded the whole world and caused
thousands of people’s death. During this strong pandemic, an enormous economic crisis was
given rise. COVID-19 has damaged countries’ markets, people’s normal life and even
economies. In Australia, relatively fortunately, the government took action to lock down the cities
at once, which prevent the virus from widely spreading and saved most Australians. However,
because of the outdoor-traveling restriction, residents could not go to work or study, which
caused a huge panic and concern in the economy. Consumers had less willingness to purchase
and this produced further problems as well. In the essay, these problems above are discussed
and further more, relative solutions to mitigating the effects of COVID-19 in Australia are
suggested.

Pandemic situation in Australia

Among all countries, Australia is currently under the most optimistic circumstances. It was the
nation’s success in dealing with the coronavirus crisis in Australia. The governments blocked
down the streets and interfered with people’s outdoor traveling, and the results are obviously
good. As Fig.1 shown, by April 15, 2020, Australia ranked lofty among those countries with

the lowest infection rate and fatality rate. Therefore, it is no doubt that the Australian
government did a great job in controlling the spread of the coronavirus. However, the maximum

control forced Australia to pay an extremely lofty price. For example, the governments’
expenditures reached an euphoric level, which produced lots of opportunity cost. Though the
pandemic situation is currently under great control, the risks for deterioration can not be
excluded. Hence, residents are not so optimistic.
Current problems existed and actions taken by the government
Australian consumers and businesses are now facing three main challenges. Firstly, there is a
significant and evolving threat from public-health. Although the figures show a very optimistic
future, the potential risks are still existing and have been putting enormous stress on consumers
and businesses. In this case, consumers prefer to be conservative and choose to save money
rather than spending money. Additionally, investors are more likely to decrease investment, too.
The direct results of this are a slower speed in economic development. Secondly, the restriction
from the government to the residents also brings lots of pressure to the economy even though it
protects people’s health very well. That people can not go out means they have no income and
will reduce consumption. Thirdly, when demand of products decrease, workers will face wage
lost or wage decrease. Hence, financial pressures has become rapid and deep because of the
restriction.

Besides the limitations of movement and everyday freedom of people, which contributes to the
low domestic infection and fatality rate, the Australian government also adopted a very essential
policy - to increase the expenditures in financial aids. According to a research recently, as Fig.2
shown, the Australian government spent 17.7 percent of GDP in economic aids, whose figures
exceeded every other country’s worldwide except for the UK and Germany. Giving priority to the
pandemic helps Australians to keep the infection rate and the death rate at a meagre standard,
but concurrently, the governments spent numerous money and had a great number of
opportunity costs. Before the vaccine is invested, the situation will be kept, and this will result in

an overloading situation for Australian governments. However, fortunately, this not only
guaranteed the aggregate demands to stay in a high level, but also injected a small amount of
vitality into the market.

Future problems predicted and additional actions can be taken

According to the research in human tragedy and the knock-on economic effects of the COVID-
19 crisis, majority (nearly 80%) of Australians declared that they are very or extremely
concerned with all strands of the COVID-19 situation—from the economy to their health to the
length of the shutdown, while the percentage will have been rising during the rest of the year, as
Fig. 3 shown. Because of the pessimistic attitude of the people, consumers’ confidence has
been slumping dramatically as well. Hence, a decrease in consumer spending is bound to take
place (as Fig. 4 shown), and as well as that, some changes are predicted to happen in
household expenditures, too. Following by the decrease in consumption, the aggregate demand
will fall by 3% to 4%, and this is directly related to the derived demand of products and services
- labour demand. In other words, workers will face risks of job-lost and unemployment rate is
predicted to increase to a figure of 10 percent at the end of the second season. With higher

unemployment rate or disposable income, Australian consumers will be further less confident.
Then, there will be a potential danger for the whole economy to sink into a vicious cycle of
falling in demand and rise in unemployment, which may further push the whole economy into a
great recession.

In the coming months, all departments and committees of the Australian government are
supposed to work hard together instead of working individually. This will give Australian
government more possibility to win the coronavirus crisis and overcome the challenges. This is
because during the pandemic, the core goals of different departments are disparate. Keeping
concerning about the pandemic, financial departments have to spend a lot. However, trauma
brought by 6-months’ wildfires before this pandemic are needed to restore as well.
Overspending in pandemic and the investment of vaccine will slow down the rebuilding work.
The health sector requires a substantial amount of human and material resources, which means
slowing down research on other projects as well. Although WHO wishes all countries to
accelerate the investment of the vaccine, it is not so worthy to spend that amount of money on
these researches, because Australia does, after all, not in such a bad situation. Hence,
communication within the departments in the governments, and through cooperation among the
departments, government budgets can be used in the most efficient way and brought the
economy higher multiplier effects.

As for the detailed policies and actions the Australian government should take, the very first
priority is to increase consumers’ confidence and encourage consumption. Hence, expansionary
monetary policies and financial policies can be implemented. For example, the government
could decrease interest rates to encourage borrowing and consumption. Another example could
be that the government may increase subsidies in small businesses related to production in
order to decrease the pressure from cost of production of the high production costs. Besides
financial and monetary polices, other actions can be taken as well. One of the actions can be
that the government may advertise positive news to the consumers. For example, to report the
progress of vaccine-inventing and public the data of virus controlling can be a great choice. The
whole point is to decrease panic and over-passive attitudes, and hence influence the
consumption.

Besides, workers' jobs should be guaranteed. It is far from sufficient for the government to only
provide transfer payments and other social welfare. The Australian government should guide
companies to efficiently use the workers while leading workers to fulfil the maximum function
and provide as much benefits as possible to the society. Hence, job flexibility can be a core
factor. Governments or companies could change workers' positions according to the conditions.
For example, textile workers can be adjusted to the assembly line of mask-making. Another
possible method to maintain the employment could be cutting direct tax rates, which can reduce
the pressure of producing, and give companies and individuals more disposable income. This
will also increase consumers' confidence to stimulate consumption. Last but not least, it is fairly
important to gradually start work resumption. According to the pandemic situation in Australia,
relatively less people infect the virus and most of them are under positive and treatment. The
probability of a second outbreak is predicted very low, which means it is quite optimistic that
Australian workers and students can return to firms or schools in a relatively short time.

Apart from taking good care of the domestic markets, Australia can be benefitted by opening
new markets in a few foreign areas. According to the latest exchange rates changes in the past
few months, the external value of Australian dollars was steadily increasing. In the situation
when the world markets have a shortage of products, and combining with a relatively goods
situation in Australia and an appreciated value of Australian dollars, it is easy to earn a surplus
in current account and help the economy to recover. As one of the example, East Asian markets
and the Middle East markets will need a lot of goods, especially medical apparatus and
instruments including medical masks and medical protective cloths. The key is to make use of
the advantage that Australia had a better pandemic environment and higher health-care level
and try to export goods to keep the GDP on a higher level.
Reference
1. Essays from McKinsey’s Sydney
2. Binging information
3. Baidu resources