The long-term impact of COVID-19 on Australia’s Economy

We had not seen a disease pandemic in our living memory. There hadn’t been one for more than 100 years. And then came COVID-19… and the world changed.

In the last couple of months, everybody witnessed the global economic activity grind to a halt. Almost in all parts of the world, governments are handing out record stimulus packages to help individuals and small businesses survive this economic hibernation.

But what are the predictions about the long-term impacts of COVID-19? When are we likely to see the economy to fully wake up from the hibernation and take a turn for the better for small businesses?

 

The expected impacts

Global Trade Analysis modelling estimates that the COVID-19 pandemic could reduce Australian GDP by $34.2 billion in the coming year. Australia’s high reliance on services and consumption for economic growth has made us more vulnerable. Household consumption is expected to reduce by $37.9 billion in 2021, along with tax expenditure reductions of $25.8 billion.

These factors could lead to a deficit of $24.8 billion when the crisis is over.

 

The response

There is no denying that these are definitely scary figures, but, particularly in Australia, the pandemic is slowing. The reality is that the longer the economic hibernation, the longer the recovery will take. But with new virus case numbers levelling out and containment measures working, what are we looking at?

Educated guesses of economic recovery from the latest modelling show a slow recovery in the new calendar year.

On the current modelling, there isn’t any expectation of a strong economic bounce back after restrictions are lifted, in the same way as the SARS situation in the early 2000s. It’s more likely to be a gradual and sluggish recovery, as the government eases restrictions with caution, small businesses start to resume operations, and potentially some additional virus spikes and new outbreaks along the way.

 

The key take away?

As long as Australians abide by the containment measures put in place for consumers and small businesses, the quicker the virus will abate and the recovery phase can start to gain traction.

As the lock-down restrictions ease, remember to stay safe, keep your distance, and wash your hands.  Do not hesitate to access support when needed. It is best to be proactive and reach out to your local accountant as they have access to the latest information and announcements on support available to individuals and small businesses, including eligibility. Get in touch with Sphere Accountants & Advisors today.