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Questions is based on an article published in the AFR titled "Australia must have a new macroeconomic framework". Please read the article and answer questions (using appropriate diagrams with reference to relevant evidence):

Questions Some argues that the pace and scale of the shock caused by COVID19 means that Australia has already

changed, and we will never return to our 'previous normal' after the recovery. Do you agree with this

argument? Explain your own experience in the context of this argument.

Answer: Many trends in the global economy already underway have been accelerated by the impact of the pandemic. Other structural changes, such as the regionalization of supply chains and a further explosion of cross-border data flows, are also likely to accelerate. The future of work is likely to multiply many of its challenges, such as income polarization, worker vulnerability, gig her work growth, and the need for workers to adapt to career changes. This acceleration is the result not only of technological advances, but also of new health and safety considerations. The economic and labor market recovery will take time and we may see change. Amplifying these trends, the realities of this crisis have prompted a rethinking of some beliefs that can influence long-term economic and social choices. the future of capitalism, economic and housing densification, industrial policy, and how we deal with issues that affect us all and require global and collective action, such as pandemics and climate change. Over the last two decades, responsibility across developed countries has shifted from institutions to individuals. There is potential for long-term change in the way institutions support people through safety nets and more inclusive social contracts. As history shows, decisions made during crises can shape the world for decades to come. The need for collective action to build economies that provide inclusive economic growth, prosperity and security for all remains critical.

The argument that Australia has irreversibly changed due to the COVID-19 pandemic is a valid one. The pandemic has caused an unprecedented shock to the global economy, and Australia has not been immune to its effects. The pandemic has forced businesses to close, and workers have lost their jobs, leading to a sharp rise in unemployment.

However, the pandemic has also provided an opportunity for Australia to reevaluate its macroeconomic framework. The government's response to the pandemic has been swift, with significant fiscal stimulus measures to support the economy, such as JobKeeper and JobSeeker. These measures were designed to prevent a catastrophic collapse of the economy, but they have also shown that the government has the capacity to spend at levels that were previously thought to be impossible.

Furthermore, the pandemic has accelerated trends that were already emerging in the economy, such as the shift to remote work and the rise of e-commerce. These trends are likely to persist even after the pandemic has subsided, fundamentally changing the way we live and work.

In this context, it is essential for Australia to adopt a new macroeconomic framework that takes into account the changes brought about by the pandemic. This new framework should be designed to ensure that the economy remains resilient and flexible in the face of future shocks.

One potential framework is the use of automatic stabilizers, which are policies that automatically adjust in response to changes in economic conditions. For example, unemployment benefits could be automatically increased during times of high unemployment, providing a stabilizing effect on the economy.

Another potential framework is the use of fiscal rules, which are guidelines for the government's fiscal policy. These rules would ensure that the government's spending is sustainable in the long term and would provide greater certainty to businesses and households about the government's fiscal plans.

In conclusion, it is clear that Australia has already changed in response to the COVID-19 pandemic, and it is unlikely that we will return to our previous normal after the recovery. However, this change provides an opportunity to adopt a new macroeconomic framework that will ensure that the economy remains resilient and flexible in the face of future shocks.