Using the principles of economics covered in learning materials from week 1 to week 10 inclusive, students should apply their knowledge of economics to analyse the macroeconomic issues and the policy responses to the impact of COVID 19 on the Australian economy. Students are expected to conduct some basic research and to reference journal articles, professional websites and other sources in the process.

Impact of COVID 19 on the Australian economy

The outlook for the Australian and global economies is being driven by the COVID-19 pandemic. The necessary social distancing restrictions and other containment measures that have been in place to control the virus have resulted in a significant contraction in economic activity, but economic conditions will improve as the pandemic is brought under control and containment measures are relaxed.

Global GDP fell sharply in the first half of 2020. The declines in the March quarter were driven by a contraction in Chinese and euro area activity as well as the rollout of containment measures elsewhere late in the quarter. A further fall in global GDP the June quarter, with many countries expected to record quarterly declines in GDP.

The Australian economy recorded a contraction in GDP of around 7 per cent over the first half of 2020; total hours worked declined by around 17 per cent and the unemployment rate rose to around 7 per cent in October 2020. Inflation rate was 0.7 per cent in the September quarter 2020.

ABS data show that employed people were 12595100 in September 2020, and 12773900 in October 2020 respectively; unemployed people were 935400 in September 2020 and 960900 in October 2020. The participation rate was 64.9.0% in September 2020 and 65.8% in October 2020.

Fiscal Policy Responses

Since the onset of the pandemic the Federal Government has provided $257 billion in direct economic support which is roughly 13% of the annual GDP in 2020. The fiscal response consists of $39 billion directly to business, $25 billion to households and the $130 billion Job-Keeper payment to support business and households through the COVID-19 shutdown.

Monetary Policy responses

The Reserve Bank of Australia has reduced the cash rate to 0.1% which is the historical low record. More details can be found at https://www.rba.gov.au/covid-19/

Outcome

The Australian economy performing better than expected. Despite the fall of GDP by a record 7 per cent in the June quarter and over 2020, and a decline by around 4 per in 2020. In the RBA's is expecting expecting a growth of 5 per cent next year and 4 per cent over 2022. More details please see

See: https://www.rba.gov.au/speeches/2020/pdf/sp-gov-2020-11-16.pdf and

https://treasury.gov.au/speech/policy-and-evolution-uncertainty

Assessment Tasks

1. Find the working age population, the labour force, and the number of unemployed persons for April 2022 and May 2022 and calculate the unemployment rates, and the labour participation rate, respectively.

(Source: https://www.abs.gov.au/statistics) (10 marks)

2. Using data from the case study, illustrate and explain the impact of COVID-19 on the Australian economy in an AD-AS model. You must use statistical data to quantify the impact on GDP growth, inflation, and unemployment. (Keep in mind that your explanation and the AD-AS diagram must be consistent.) (10 marks)

Note: Please provide AD-AS diagram as well.

It has high marks.