The world is still battling with Covid-19. And like other economies of the world, the Australian economy is also close to collapsing. The impact is visible, with unemployment predicted to shoot up in Australia.
The Australian government cleared its Economic and Fiscal perspective after being trapped by the virus. It has set out the impact of Covid-19 on finances and the world economy. It further stated that all support provided by the government had protected the economy from the negative outcome due to the pandemic. This measure has taken Australia out of the downturn.
It is anticipated that the economy of Australia will shrivel by 2.25 percent in 2020/21. In the year 2020, the government predicts a 3.75% contraction in economic activities, before ascending in 2.5 % in 2021. The government further predicts that the rate of unemployment will escalate to 8.75% in 2020/21, which was computed 7.4 % in June 2020. The government forecasts that unemployment will be at its peak in December 2020, with figures of 9.25%.
The government further mentioned that the JobKeeper subsidy’s introduction came to the rescue of unemployment and hasn’t allowed it to go beyond the forecast. Such a measure saved approximately 70,000 folks from getting unemployed, which otherwise could have risen the unemployment rate by 5% more than the current unemployment rate.
Whereas, others gave unenthusiastic estimation. The OECD concluded with the forecast that the economy of Australia will contract 5 percent in 2020 due to COVID-19 infections) which will further decline to 6.3 percent if the infections from the virus hit back with more power. The OECD stated that next year, the economy would grow by only 1 %. The OECD stated that the system should confirm that the social safety net is ample and think of investing in energy efficiency expansion.
As per the current scenario with Australia still fighting with more rounds of infections, the economy could not return to its stage in December 2019. It could level it up to the growth rate in 2019 around 2022 only.
As per the forecast of Australian Treasury:
- US economy will reduce by 8.0 percent in 2020 and grow up 4.75 percent in 2021
- China is anticipated to grow 1.75 percent in 2020 and 8.25 percent in 2021
- Japan will shrivel 6.25 percent in 2020 and nurture 2.75 percent in 2021
- India will shrink by 4 percent in 2020 and grow up 4.25 percent in 2021
- The Euro area will be worse affected by a shrink of 8.75 percent in 2020 and a growth of 5 percent in 2021.
From Fiscal point of view
According to government, it has endowed the economy with A$289 billion in monetary and balance sheet measures, roughly 14.6 percent of GDP. Fiscal aid further continues with the JobSeeker Bonus Payment, the JobKeeper wage subsidy, and the Cash Flow Boost.
Balance sheet steps taken by the government include the SME bank loan guarantee scheme. The straight fiscal aid by the government approximates at 9 percent of GDP, which is undoubtedly among the largest packages offered by the rest of the countries of the world. It is considered that colossal expenditure will save the finances of the nation. The fundamental deficit is estimated to be A$85.8 billion in 2019-20 or 4.3 percent of GDP. However, in the year 2020-21, the deficit is presumed to escalate to 9.7 percent of GDP.
Net debt of the KIWI’s is predicted to breed from A$488.2 billion in 2019-20 to A$677.1 billion in 2020-21.
Policies introduced
In addition to tax and superannuation relief from the government, it has recently introduced and implemented various policies to safeguard the economy from prospective damage.
- Extension of the application period for early access to superannuation
To provide a way out to people struggling amidst COVID-19, the government permitted people to procure superannuation with the maximum limit to $10,000 in 2019/20 and $10,000 in 2020/21 income year on the tax-free ground. The application period will also be extended to 31Dec 2020 from 24th September 2020.
- Extension of COVID-19 SME Guarantee scheme
The Coronavirus SME Guarantee Scheme has been declared to save and provide working capital to SME’s (small and medium enterprises). The scheme is extended from September 2020 to June 2021. According to the program, the government caters assurance of half or 50% of the loan offered by entitled lenders to small and medium-sized businesses.
- Expansion of Apprentice and Trainee wage subsidy
Apprentices and Trainees wage subsidy is also expanded. The new wage subsidy gave small business employers 50 % of an apprentice or trainee’s wages for nine months with the limit of A$7000 every quarter. The subsidy slated to end on 30th September 2020 shall extend to 31st March 2021. It has been expanded from 1st July by the inclusion of medium-sized businesses.
- JobKeeper Wage Subsidy extension
As per the latest introductions by the government, the JobKeeper payment that was scheduled to end up on 27th September 2020. It will extend to 28th March 2021 to eligible businesses and not for profit. The payment rate is slated to decrease from $1500 per fortnight for eligible employees and $1200 per fortnight for business participants from 28th September 2020 and $1000 per fortnight from 4th January 2021.