Question: Utilisingeconomic theory and illustrative examples to explain why Australiawas ina deep recession in 2020. Assess the effectiveness of the government response in limiting the depth of the recession and in contributing to recovery from it.
My answer:
Times New Ro... 12 A " B I U LYAVA ... Ev A HIty Essay 2 Since the Great Depression, Australia has entered a recession due to the Covid-19 pandemic. Once the economy recovers, Australia's future prosperity will be affected by the severity and duration of the economic recession, and it will also be affected by the rate of productivity growth. Economic recession usually means that fiscal, monetary, and other policy departments will quickly adapt to meet immediate challenges. This can contribute to long-term living standards, as the severity of the recession and the speed of recovery can change the long-term growth trajectory, especially considering the scarring effects of major recessions (such as 3 workers' loss of skills and connections to the labor market). However, long-term living standards are also affected by potential structural policies and institutions, and these effects may last longer. Past economic downturns have often caused people to rethink the broader policy environment. The chart below illustrates the recent recessions in Australia. The blue bars represent prosperity and the red bars represent recession. As can be seen from the chart, the worst recession is the Covid-19 pandemic in 2020; the gross domestic product (GDP) is facing a record low. As can be seen from the chart, the worst recession is the Covid-19 pandemic in 2020; gross domestic product (GDP) is facing a record low. 6 1 # 8 / 11 3 2,191 85 4X189) - 100% + Microsoft RABARNWord TECO602 Economic Environment of Business- 2021005392 - BB 7 1 OneDrive v 9 BE(Alt + Q) Times New Ro... v 12 A* A" B IU LAVA ... EVEVE E E HIty U 6 1990-91 Australia's most recent recession 2008 Global financial crisis 2 0 Forcat -2 2000 Dot-com crash 2020 -4 COVID-19 pandemic 1974 Oil Crisis 1981-83 Disinflation -6 recession in the US -8 1959 1969 1979 1989 1999 2009 2019 Gross Domestic Product, chain volume measures. Source: ABS (Australian National Accounts: National Income, Expenditure and Product, June 2020, Cat. no. 5206.0, table 1). There are many reasons for the decline in GDP, including national blockades, border closures and business closures. Due to the national lockdown, many industries that rely on part-time jobs are affected, such as pickers on farms. Due to border closures, many industries that rely on imports and evnorte for their livelihoode cannot continue to onerate and have cancel a # 8 / 11 H 2,191 185 - 100% + Microsoft HEARDWord TECO602 Economic Environment of Business- 2021005392 - BAZ OneDrive v 9 BE (Alt + Q) Times New Ro... v 12 A" A" BIURAVA ... IEME EE Ev A Hitv U FE V There are many reasons for the decline in GDP, including national blockades, border closures and business closures. Due to the national lockdown, many industries that rely on part-time jobs are affected, such as pickers on farms. Due to border closures, many industries that rely on imports and exports for their livelihoods cannot continue to operate and have caused a global financial crisis, such as the lobster industry in Western Australia; unemployment rates have risen due to business closures, such as bars and restaurants. Starting from April 2020, many companies that continue to be adversely affected by COVID-19, especially those in the tourism, travel, wholesale and retail industries, are facing new mobility and employment pressures. Some professionals define vulnerable employment based on a detailed assessment of the industry, with one-third or more companies reporting reduced working hours each week after the first COVID-19 lock-in (March 30, 2020). These companies are mainly in the consumer, tourism and community service sectors. They hire people who work in accommodation and food, art and entertainment, education, "non-essential" healthcare, retail, and transportation. The following charts illustrate the increase in unemployment rate due to the above-mentioned reasons. Unemployment surges in July 2020 # 8 / 11 2,191 107 +x(89) - 100% + Microsoft HEARDTimes New Ro... |12 A B IU VAVA .. . Ev EVE E EV HIty U . . reasons. nemployment surges in July 2020 Unemployment rate, Seasonally adjusted 7% 5% 2014 2015 2016 2017 2018 2019 2020 Source: ABS Source: ABS The unemployment rate depends on how the structure of the market and government agencies in the economy leads to the matching of workers and employers in the labor market, especially during the special period of covid-19. According to government policy, indoor places and gathering places for people who tend to gather are prohibited or even closed, such as restaurants and bars, various shops, weddings and funerals. A large number of sudden unemployment has risen sharply and will reach a peak around July 2020. As can be seen from the charts below, due to the pandemic affecting the Australian economy, 5 market records (including ASX 200, S&P 500 and NASDAQ) began to decline, especially in March, when Australia began to close its business and close its borders. The closure of enterprises and the closure of borders mean that various trade activities will also be closed, # 8 / 11 3 2,191 185 - 100% - a Microsoft HABARNTimes New Ro... v 12 A A" BIULAVA ... BEVEVE E E HIty U enterprises and we closure of verdeis Incall ulat various wade activities will also ve closed, large and small enterprises will be affected, especially small enterprises are the most serious, because their resources and funds are not as rich as large enterprises. Not only Australia is affected, but the most serious is the global financial hit. Due to the new coronavirus, the global economy and GDP have fallen sharply. Markets come crashing down Record falls 8% 8% ASX 200 S&P 500 NASDAQ ASX 200 58P 500 NASDAQ 16% -8% 25%% January 2020 February 2020 January 2020 February 2020 March 2020 Source Reuters Cloon Source Boulets Elion (to March 181] Source: Reuters Eikon Source: Reuters Eikon The three GDP charts below illustrate the economic process from recession to recovery in 2020 in Australia (recorded every three months), including from the inevitable recession (June 2) to recession (September 2) to recovery (Decenber 2) process. GDP also contains potential factors, such as labor force size, human capital, tangible capital including infrastructure, etc. These factors may mean that different economies have different unemployment rates. depending on the economy's unemployment rate. In fact. in the short 6 # 8 / 11 2,191 05 4X(90) - 100% + Microsoft AREARETimes New Ro... v 12 v A" B I U LY AVA ... VEVE = =VA O # # v U . . unemployment rates, depending on the economy s unemployment rate. In fact, in the snort 6 term, productivity can already be seen to decline in extreme ways (for example, all companies' stock prices fall or debt increase), and in the long run, the economy is declining. However, during the Covid-19 pandemic, certain industries can still survive, such as IT for education, medical supplies, cleaning, delivery services, remote work, social platforms, etc. Q1 GDP Q2 GDP Q3 GDP -0.3% -7% 3.3% The Australia Federal Government not only provides JobKeepers and JobSeekers to help businesses and employees, but also provides a JobMaker Hiring Credit Scheme to encourage companies to hire more young job seekers aged 16-35. Qualified employers can obtain JobMaker Hiring Credit for each additional qualified employee they hire between October 7, 2020 and October 6, 2021. In addition, the Australian Federal Government has allocated 257 billion Australian dollars to promote economic recovery. In the 2020-2021 budget plan, 25 billion Australian dollars will 8 / 11 3 2,191 185 - 100% + Microsoft HRBARRTimes New Ro... v 12 B I U LVAVA . . . EVE E EV A HItv U . . be allocated for covid-19 response measures and 74 billion will be used for new measures to create jobs. The new measures include the following: 1. Provide JobMaker subsidies for 500,000 young Australians, 2. Subsidy skills training. 7 3. Support the independent development of the manufacturing industry and create employment opportunities, 4. Encourage corporate investment, create economic activities and employment opportunities, 5. Tax cuts, 6. Increase investment in basic measures, and 7. Subsidies including pension recipients will provide two more welfare payments of 250 Australian dollars. Recovery mode Employment now at record high 25% ASX 200 . SAP SOO NASDAQ 13.3 8 / 11 3 2,191 85 - 100% + Microsoft HABARRTimes New Ro... |12 A A B I U LVAVA . . . Ev Ev A HIty U . . 30% Me-21 - 120 Jan Fab Mar May Jun A MA Source: ABS Labour Force Survey, Australia Source: Reuters Eikon Source: ABS Labour Forces Survey, Australia The pictures above are other explanations of how the economy has recovered from the Covid-19 pandemic after the government adopted JobKeeper, JobSeeker and other fiscal policies. These policies and schemes keep employees in touch with employers and provide much- needed income support. This ensures that many supported employees have jobs to return and avoids the scars of long-term unemployment. The first phase of the plan (March 2020 to September 2020) provided support to 3.8 million individuals. A broad-based plan that provided support to Australians in the worst pandemic is now over. As more Australians are working than ever before, the schemes such as JobKeeper provides an unprecedented opportunity for employment recovery. Furthermore, if we are to use the aggregate demand and aggregate supply framework to illustrate the economic recession and recovery during the Covid-19 pandemic, we assume that the economy is initially at a level of full employment. 8 Potential GO Potential GDP AD AD AS, AS. 8/ 11 2,191 185 100% - a Microsoft HABARNTimes New Ro... v 12 A" BIULAVA ... . . that the economy is initially at a level of full employment. 8 Potential GOP Potential GDP AD. AD AD AS, AS. AS Price Level E. Price Level P. Ep Y. Y. Real GDP Real GDP (a) Inflationary pressure from a shift in AD (b) Inflationary pressure from a shift in AS Chart A on the left explains that the pandemic reduces aggregate demand in the economy, so the AD curve shifts to the left. This brought about a period of economic recession. As can be seen from Figure B on the right, after the government adopts an expansionary fiscal policy. the economy will operate in the following way: the AD curve will shift to the right. # 8 / 11 3 2,191 185 - 100% + Microsoft #HERRR
