We explore how COVID-19 impacted Australia's economy, as well as what the country is doing to bounce back.
It’s no secret that the global economy is always changing and the recent effects of COVID-19 seem to only exacerbate that fact.
In particular, the Australian economy has faced intense economic challenges due to lockdowns and regulations in regards to the country’s response to the global pandemic.
Still, the economy is expected to adapt to these changes through workforce development and by embracing a greener, more sustainable approach.
Here, we’re briefly exploring the current state of Australia’s economy, how COVID-19 changed everything and the Australian economic outlook for the future.
The Current Economy of Australia
To understand the current state of the economy in Australia, it’s important to first understand what we actually mean by the term “economy”.
While we won’t be able to explain everything there is to know about what an economy is right here and now, there are a few key ideas to grasp the basics of.
An economy is an interconnected web involving the way factors of production work together. Additionally, there is a local economy, a national economy and a global economy, which means that production and consumption operate on a range of scales.
In simpler terms, an economy is made up of buyers and sellers as well as government players who regulate and tax these interactions.
Economies are generally measured by a country’s GDP or gross domestic product. Australia’s Gross Domestic Product is a measure of how much Australia economic growth is or isn’t happening.
So, in Australia, when buyers are able to buy in large quantities and sellers are able to meet those demands, it’s said that Australia’s GDP is riding high. But, when buyers are unable to spend, sellers are then unable to sell. In those situations, the economy of Australia is said to be failing.
Of course, this is an oversimplified explanation of what an economy actually is but, generally speaking, when most people talk about the Australian economy, it’s this interaction between buyers and sellers.
The inflation rate in Australia, supply and demand, production costs, resource availability and more also all relate to this idea of a healthy economy. But again, we won’t go into the nuances of the economy here.
Still, it’s safe to say that not many aspects of the economy of Australia are going so well. Why? Well, the elephant in the room is the COVID-19 pandemic and the changes it brought to everyone’s lives.
Impact of COVID-19 on Australia’s Economy
In Australia, the response to COVID-19 included social distancing, contact tracing, mask-wearing, travel bans and lockdowns. However, the effects on the economy by these changes largely depended on which industry you were in and where in Australia you lived.
Still, it’s undeniable that the impact of COVID-19 has far-reaching effects, not only for the Australian GDP but for the workforce of Australia as a whole. Some of the impacts of COVID-19 involve:
- Poor workforce mental health
- Education disruption
- Healthcare disruption
- Supply chain disruption
- Inflation rate in Australia
This undoubtedly short list outlining some of the impacts of COVID-19 on the economy of Australia is most definitely incomplete. But, let’s go over each of these factors and how they affect Australia economic growth — or lack thereof.
Poor Workforce Mental Health
The first thing to know about an economy is that it’s not likely to run without a strong workforce. And since the recent social isolation measures have severe consequences on mental health, it’s not a good sign for workers in all industries.
According to the Australian Institute of Health and Welfare, around 17.6 million mental health services were processed between March 2020 and June 2021.
Whether people lost their jobs or were quarantined in an unhappy home, these isolation requirements certainly created stressful environments for many Australians who make up the workforce.
And even if a person is able to work from home, isolation still wreaks havoc on mental health in terms of work/life balance or feeling completely out of control.
All in all, the poor mental health of the Australian workforce due to COVID-19 is taking a toll on Australia’s economy as production slows down.
Next, education at all levels has been massively disrupted by COVID-19 restrictions. According to UNESCO, by March 2020 the education of over 87% of the world’s student population had been disrupted and in Australia, K-12 education has been disrupted in every state.
Not only were many Australian children taken out of school to learn in a virtual environment for the first time, those who found themselves upskilling or working towards higher education were also affected.
For industries requiring highly skilled workers or workers who require an in-person setting for learning, new educational methods will be required to see Australian economic growth.
Again, without a healthy workforce, the economy of Australia is at risk. So, with hospitals putting all their focus on preventing future outbreaks of COVID-19, it means that other health treatments are potentially put on hold.
Results from a WHO survey found that even after a year into the pandemic, around 90% of countries continue to report one or more essential healthcare disruptions due to COVID-19.
Therefore, even though these protocols are in place to help keep Australians safe and healthy from COVID-19, this disruption in the ability to give or receive proper health care is another factor causing the destabilisation of Australia GDP.
Supply Chain Disruption
While we only briefly mentioned it beforehand, the relationship between supply and demand is a huge factor in understanding the health of an economy.
Whether you don’t have enough supply to handle consumer demands or you have too much supply with not enough demand, you’re in trouble either way. The same principle applies to the wider economy.
COVID-19 and its related travel bans, border restrictions and workforce disruptions, has (as predicted) created huge negative effects on supply chains.
When businesses can’t get enough supply to sell to customers, their business has a higher chance of failure. And with fewer businesses around to meet the demands of consumers, the overall economy suffers.
Inflation Rate in Australia
Inflation is another complicated topic related to a country’s economy. So, without going into too much detail, inflation refers to the way prices rise over time.
Just think about how much a candy bar cost in the 60s compared to today. That’s inflation.
According to Statista, the inflation rate Australia-wide is 1.73% in 2021, but it’s projected to increase each year for the foreseeable future.
When inflation occurs and the cost of goods increases, it means your money is worth less than it used to be. In other words, if you have the same amount of money now that you had in 1990, you won’t necessarily be able to afford the same things today.
Since supply chains and workforces have been severely damaged throughout the response to COVID-19, these inflation predictions seem realistic.
Those who have control over the supply of limited essential goods can hike up the prices. And as demand then decreases, inflation continues. Again, it’s a complicated process, but the inflation rate in Australia due to COVID-19 may largely affect Australia’s economic recovery.
Australia Economic Outlook
There are countless predictions for the future of the Australian economy in the aftermath of COVID-19.
And while it may take a while to bounce back from the undoubtedly major setbacks the economy of Australia has seen since March 2020, the changes that may occur moving forward aren’t necessarily all bad.
But to see Australia’s economy grow over the next few years, there are a few things that we’ll likely start to see change within the country:
- Workforce development will change.
- Hybrid jobs will be the norm.
- Australia will transition to a green economy.
First of all, the way we develop workforces in the future will undoubtedly need to change. With COVID-19 altering the world of work forever (on top of rapid technology expansion), Australians are now required to learn and adapt faster than ever.
Research from LinkedIn completed in early 2021 found that, during COVID-19, 130% of workers are spending more time learning, and there were 159% more CEOs who champion learning and development.
In terms of focus, workforce development is likely to see stronger attention paid to technology, more consistent upskilling, data and AI integration, coaching, mentorship and management, as well as a stronger focus on business aims.
In other words, the Australian workforce will need to be in a constant state of development to stay relevant in any industry.
Another change brought on by COVID-19 is the reality of hybrid jobs within the Australian economy. A hybrid job is essentially a blend of two or more previously separate jobs into an all-in-one role.
For example, those who used to solely work as a coder are now expected, in some cases, to also be technical writers and managers.
The jury’s still out on whether this approach has long-term consequences for workers themselves. But the reality is that technology is expanding at such a high speed that workers fear being left behind if they don’t future-proof their jobs with multi-faceted skills.
This all goes back to the workforce being in a constant state of learning and development as workers will likely be required to upskill more frequently.
Transitioning to a Green Economy
Last but not least, the transition to a green economy is probably the only prediction for the economy of Australia that has little to do with COVID-19. Climate change and the sustainability of Australia’s GDP are a massive concern — one that economists certainly consider.
If an economy is all about supply and demand, you’d be hard-pressed to find an economy that can function without ecological resources.
Even if your country doesn’t sell natural resources, it likely purchases them. In short, no one is exempt from thinking about how climate change will affect their economies.
What does a green economy mean for workers? Only time will tell.
We’ve learned that as a result of COVID-19, the Australian economy will likely bounce with an updated workforce development plan, a way to continuously learn in our jobs and a green economy transition.
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