Within just a few months, the COVID-19 crisis has had far-reaching effects. An area that has seen great change due to the outbreak is our economy. Job loss, the closure of businesses, and stock crashes are just some of the effects of this global pandemic. JCU Associate Professor Taha Chaiechi gives valuable insight into our current economic situation as well as what to consider when looking ahead.
The breakdown of the outbreak
Taha describes our situation as a twin-crisis: the outbreak of COVID-19 has impacted both public health and economic systems around the world. “Understandably, the economic consequences of the outbreak are not exactly understood at this point,” Taha, who is the Australia Director for the Centre of International Trade and Business in Asia, says. “Nonetheless, the economic warning signs are here and we have already seen the pandemic’s immediate impact on employment levels, household income, industry operations, and supply chains.”
We have also seen an impact on a broader economic scale. “The current global feeling of economic insecurity has affected buyers’ demands for goods and services, adversely affecting retail sales and overall consumption,” Taha says. “In the financial sector, the stock market has faced record-breaking crashes in recent weeks, indicating that investor’s confidence has also been shaken.”
Health is wealth
In looking at why this outbreak has had such a massive effect on a global scale, Taha points to the phrase ‘health is wealth’. “This crisis is happening at such a large scale because there is a vital relationship between the population’s health and economic performance, particularly in our highly mobile world,” Taha says.
Essentially, a healthy population equals a healthy and productive workforce. “High worker-productivity leads to larger volumes of production, higher levels of investment, and ultimately more income for wage-earners and profit for investors,” Taha says.
So, what happens when the ‘health’ part of the equation turns negative? Taha says it equals social and economic disruptions. “When a large portion of the society becomes seriously ill or is at risk of becoming ill – particularly with a contagious disease – we should expect to see large-scale global social disruptions and restricted mobility with huge economic losses.”
Just as a virus spreads rapidly across countries through global mobility, economic consequences can have a domino effect. “The economic shock of the disease in one country blows out to other countries – particularly to their trade partners – through connections associated with globalisation,” Taha says.
The infected and the affected
With countries in lockdown, populations in self-isolation and quarantine, and a shortage of essentials, it’s an understatement to say that we have all been affected in some way by the COVID-19 crisis. With all of these effects rippling out into the global population, it’s hard to say who is being affected the most in economic terms.
Taha points out that the complexity of the situation makes the title of ‘most affected’ completely subjective. “Most industries – including hospitality, food, retail, aviation, tourism, manufacturers, education, and healthcare – have been hit hard by the pandemic,” Taha says. “We have also seen that thousands of jobs are lost as service providers and production facilities are forced to shut down to prevent the spread of the disease. So, from an economic standpoint, it is hard to say who has been affected ‘the most’, but evidently, wage-earners, including casual workers and renters, will be amongst the most vulnerable groups during this economic downturn.”
The silver lining
Taha acknowledges that these are unsettling times. “Presently, we are facing a sharp economic contraction, and we won’t know if this contraction is actually a recession until we have official data for June quarter and beyond,” she says. “But we do know that here in Australia we have automatic stabilisers in our tax system designed to absorb part of this shock.”
Taha emphasises that an analysis of our economic situation isn’t all bad news. “The government has moved quickly to design and roll out stimulus packages that include, but are not limited to, assisting businesses with cash flow, providing households with tax-free stimulus payments, providing business with tax reliefs, backing business investments, and providing extra health support,” she says. “These fiscal responses can give our society space to breathe as we recalibrate our future strategies.”
“Another piece of good news is that some sectors are aggressively hiring thousands of new workers as a response to the COVID-19 crisis,” Taha says. She explains that these increases in employment are mostly due to an upswing demand from panic buying or due to companies and services providers recalibrating their purposes. “So, even though this pandemic has created struggle, the future will not be all doom and gloom, and a monumental rebound will come.”
In looking ahead to what our economic future may hold, Taha first looks back. She explains that historically, we have seen that large-scale crises have led to new ways of economic thinking and revolutionised the way people live. “I believe that when this crisis has passed, we will witness significant change in the way we think and act, individually and collectively,” Taha says.
Taha suggests that as we are in self-isolation and the economy is essentially in hibernation, this is an opportune time for us to consider how we will move forward. She suggests that businesses take this time to consider diversification (where possible), review their flexibility, and consider continuity plans to minimise potential damage due to loss of customers.
Additionally, Taha explains that this is the best time for businesses to consider re-training their staff to prepare them with new skills that will likely be needed during the recovery period. “This is particularly important because when the recovery phase starts, the economy will expand quickly and the workforce needs to be ready to grab opportunities,” Taha says.
As for individuals, Taha suggests that this period of social limbo is the time to upskill, as it is likely that after the pandemic, employers will change the skills they are looking for in potential employees. “This is a window of opportunity to go back to school to learn new skills or to upgrade your existing skill sets to become more competitive when industries begin to hire again,” she says.
As you social distance, you can prepare for what comes next. Use this chance to investigate the economic circumstances and develop a plan for your economic future. Dig into what’s happening in different sectors to find where there are current or potential opportunities as a result of these unexpected changes. Engage with the information available so that whenever this pandemic passes, you are ready.
Interested in how our society and our economy work together and want to know more? Check out JCU Business.
If you or someone you know is struggling with mental health during this time, help is available at Beyond Blue or phone Lifeline on 13 11 14. JCU students seeking help can also book sessions with the free JCU Counselling Service.
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