Global travel has all but halted; jobs are under threat the world over, people are living in fear for their health, lives and livelihoods; all in all, life has become much more challenging. COVID-19 threw the world headlong into panic and lockdown, and countries that were not already in a recession, have now joined the club. In Europe, economic activity is crawling at a snail’s pace, Germany slumped into a recession, Italy is in, what is considered to be, a perma-recession and Greece has now suffered the longest recession in history. The aftermath of Brexit, the ongoing COVID-19 pandemic, George Floyd protests and the U.S-China trade war amplifying calls to reduce dependence on China, all set the scene for a very unstable global economy. Negative GDP growth, high unemployment, falling consumption, collapsing retail sales, declining small business income, rising government spending and social and political turmoil combine to make the perfect recipe for a major financial crisis.
Australia at a Glance
The global economy is expected to contract by 3% in 2020. The recession is likely to be the worst since The Great Depression of the 1930s, surpassing the Global Financial Crisis (GFC) of 2008. Even though Australia is about to suffer its first recession in three decades, it’s hard not to see that the country has fared incredibly well through the COVID-19 pandemic compared to the rest of the world. Australia and New Zealand instigated the worlds best response to COVID-19 and also achieved the best outcomes. Today, Australia has only 469 active cases, and on June 8, NZ was declared COVID-19 free after the last person diagnosed with the virus, fully recovered. After implementing one of the strictest lockdowns in the world, NZ enjoyed three weeks without any new cases but has since registered two new cases.COVID-19 is hovering over the shoulder of the 2020 recession that is adding to consumer frustration.
The Australian Recession 2020– March Quarter:
- March growth contracted by 0.3%- in line with market expectations.
- Government spending and net exports contributed to growth in the quarter. This was more than offset by the contraction caused by falls in consumption, investment and inventories.
- Fears of COVID-19 and subsequent lockdown caused panic buying of groceries and household goods, yet total consumption still fell by 1.1% in the March quarter. Making this the largest quarterly decline in consumption in the last 34 years.
- 10/17 consumption categories fell.
- Spending on transport services, hotels, cafe’s and restaurants drastically decreased, experiencing their largest falls on record.
- Net exports contributed half a percentage point to growth in the March quarter.
- Travel bans severely impacted services trade, and after eight consecutive quarters of growth, services exports fell by 12.8%. Services imports also fell sharply by 13.6%.
It is expected that the country will experience two consecutive quarters of economic downturn. However, Australia is faring better than other countries such as the US, Germany, France, Japan and China. This situation could have been considerably worse was it not for the travel and social distancing restrictions that were put in place during the March quarter.
Economically, China is Italy’s third-largest supplier and is Australia’s largest trading partner. The country also contributes heavily to the tourism industry, with over 3.5 million Chinese tourists flocking to Italy annually and nearly 1.43 million visiting Australia every year. As China emerges from the grips of COVID-19, and the manufacturing sector boasts a head start on the rest of the world, the global reality may hit below the belt. With the US trade war, ongoing COVID-19 conspiracy theories, and the US, Europe, Japan and Australia all struggling economically, most are looking to reduce their dependence on China, and very few are buying Chinese goods. However, when times seem bleak, there is often hope. In a time of a struggling global economy and recession, there lies opportunity. These times offer the perfect opportunity for countries to develop strategies to repatriate key industries, diversify supply chains to create greater resilience, and to eliminate trade-dependent relationships. If there’s a takeaway message from the COVID-19 experience, its that no-one should have all their eggs in one basket. In this age of globalisation, we must be smarter than ever before.
Many countries are now in the second wave after restrictions were slowly lifted after numbers of cases declined. However, the second wave of infections is now driving a re-imposition of lockdowns, prompting the International Monetary Fund (IMF) to declare “profound uncertainty” for global economic recovery. While further extended lockdowns will save lives, they will also further exacerbate any economic woes.
If George Floyd’s death at the hands of police officers and subsequent outrage and global protests should teach us anything, it is that the time has come to embrace diversity. It is time to live authentically, to respect every other human being, their race, ethnicity, gender, sexual orientation, socio-economic status, age, physical abilities, and their religious and political beliefs. Not only is it a time to fight COVID-19 and the global recession, but it is also a time to fight injustice and oppression while learning to stand on our own two feet. It is only then that we can live a truly harmonious life.
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