Impact of COVID 19 on the Australian economy The outlook for the Australian and global economies is being driven by the
Posted: Sun May 29, 2022 7:03 pm
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/pd ... -11-16.pdf and
https://treasury.gov.au/speech/policy-a ... ncertainty
Task: 1. Summarise the RBA's monetary responses to COVID 19 and
identify the type of monetary policy. In an AD-AS model, illustrate
the RBA's monetary policy responses, explain the monetary policy
transmission mechanism, and illustrate the monetary policy
objective. Discuss the limitation of the monetary responses due to
the size of the policy response in the current situation.
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/pd ... -11-16.pdf and
https://treasury.gov.au/speech/policy-a ... ncertainty
Task: 1. Summarise the RBA's monetary responses to COVID 19 and
identify the type of monetary policy. In an AD-AS model, illustrate
the RBA's monetary policy responses, explain the monetary policy
transmission mechanism, and illustrate the monetary policy
objective. Discuss the limitation of the monetary responses due to
the size of the policy response in the current situation.