SYDNEY, Australia – Expert warns that the Australian economy may be looking ahead to a second wave of losses due to the health crisis brought by COVID-19 pandemic.
While the Australian government is putting billions worth of stimulus packages into its coronavirus outbreak response, an expert warns that the costs may be higher moving forward. Economic losses may top up over the $320 billion the country already dispersed.
Brendan Coates, the household finances program director at Grattan Institute, stated that the effects of the COVID-19 pandemic in the Australian economy are not yet fully realized. He said that the impact would be more profound than anything the country has seen, even during the Great Depression.
Mr Coates commented about the issue during a Grattan Institute-hosted webinar on Thursday. According to him, various organizations, including the Organisation for Economic Co-Operation and Development (OECD), previously showed an estimation of the effects on the health crisis in one-quarter of the world’s economic activity.
Based on it, the annual gross domestic product (GDP) may go down by around 2% for every month that there is a lockdown in the world.
According to Mr Coates, the country has gone far in terms of the direct costs spent due to the ongoing public health crisis. That includes the government rescue programs worth $320 billion in total, such as the JobKeeper payment scheme that is costing the government around $130 billion.
However, he further stated that the second round of economic losses could be even worse for the country. Mr Coates noted that this round of impact would be because individuals and businesses are trying to scale back on their investment and spending. That may be the case even for those who are not directly impacted by the health crisis, he said.
Mr Coates also stated that consumer confidence has considerably dropped recently.
The consumer confidence index crashed to its lowest level in over 50 years in the week ending March 29 based on the survey by ANZ-Roy Morgan. Mr Coates added that the figure came back up after the government’s stimulus packages, but only for a little bit. The consumer confidence in the country remains on the down-low, which suggests that the stimulus may not be doing that much to restore the sentiments.
Mr Coates also noted that there is a sign of an upcoming economic loss for the country based on the data from the Australian Bureau of Statistics. He emphasized that the figures show a large number of companies experiencing the impacts of the ongoing health crisis on their turnover, especially with the imposed social distancing measures.
He added that the global financial institute Bank of International Settlements, which owned by a lot of bankers, made modelling. From this, he saw that the Australian economy would experience with a second-round of losses.
The next couple of weeks will show the long-term impacts of the health crisis in the country’s economy, he said. It will draw a much more unobstructed view of what Australia is going to experience at the end of this pandemic.
Meanwhile, government authorities are currently finding the best ways to end the lockdown and ease the ongoing social restrictions.
Mr Coates expressed several strategies that could help with the matter. According to him, a short and sharp shutdown may be useful in eliminating the virus in the country. It will cause the most minimal effects of the country’s economic activity as opposed to a more extended period of lockdowns, he said.
However, Australia will know more about these issues, particularly if easing the restrictions can still help curb the infection rates after what will happen in countries such as China, Japan, and Singapore who are doing such measures.
Further, Mr Coated commented that if Australian Prime Minister Scott Morrison follows through with his previous suggestion, the country will experience an even worse second-round of economic losses. Previously, the Prime Minister suggested a snap comeback on the government’s rescue packages after six months.
He said that the country might be looking towards a severe recession where the unemployment rate will take much longer time to reach a more positive level. Mr Coates noted that it could even be a lot worse if the country expects that everyone can go from getting economic support to their previous lives afterwards.
Overall, he commented that the country could come out of this ongoing crisis with a hefty $500 billion debt. There were also some discussions on who would eventually have to shoulder the obligations, he said.
According to Mr Coates, the future generation will most likely be going to pay the country’s billion of debts and taxes may also increase anytime soon.
He also commented that there are currently significant reasons why superannuation tax breaks and other policies should see some changes to help recoup some of the country’s lost revenue.
Meanwhile, over 600,000 of Australians already applied to get their superannuation savings earlier under the scheme from the Federal government to provide aid for individuals losing their jobs due to the virus.
The government is not allowing Australian workers who lost their employment and are profoundly affected by the ongoing health crisis to access the $20,000 from their superannuation savings account. The scheme will take effect starting April 20, and the early release will be tax-free.
They can access the sum in two withdrawals with the first $10,000 available between April 20 and July 1, and they will get the second set after three months.
Based on previous reports from the Australian Taxation Office (ATO), there are already a total of 617,800 registrations for the superannuation’s early access as of April 8. The number of applications will most likely continue to increase the following days. As of Friday, the amount already gone up by 360,000.
However, there is currently no estimate as to how many of these applicants are eligible for the system. The Australian government previously estimated that the early release of super savings tax-free could be as high as $27 billion. However, some experts are saying that it could even be twice as expected by the government.