Y11 Economics Essay - Impact of COVID-19 on Australian Economy (NEED FEEDBACK!)

[zbolland]

Limited to 700 words because of COVID-19 restrictions... I know. Weird. Anyway, would really appreciate any form of feedback before I submit my assignment tomorrow.

Explain the impact(s) of the current health crisis (COVID-19) on the Australian economy.

• Consider the economic impact of COVID-19 on businesses
• Consider the economic impact of COVID-19 on consumers and individuals
• Integrate relevant evidence such as statistics and economic views

The current health crisis has had a substantial impact on consumers, individuals and businesses within the Australian economy. Consumers have limited spending and have become more frugal with their income/resources due to increasing unemployment rates. Businesses have experienced a considerable reduction in the demand for g/s and a reduction in productivity due to the imposed government restrictions. COVID-19 has had a detrimental impact on the Australian economy, causing the economy to contract and experience a negative demand shock. Consumers, individuals and business have been adversely affected by the health crisis and have suffered severe consequences.

Consumers have been significantly impacted by the health crisis, altering their spending habits and increasing their overall frugality by preferring to spend income on basic needs instead of luxuries. To avoid the spread of the virus, the NSW Government shut down non-essential businesses in late March (Time News, 2020). As a consequence, it caused the number of unemployed people and underemployed people to rapidly increase. The unemployment rate has risen 1% and the underemployment rate has risen 4.9% from March 2020 to April 2020 (ABS,2020). Because of this, the economy is operating below full capacity and is inefficient; leading to lower output and incomes. Rising levels of unemployment result in an immediate decrease in overall consumer spending due to the loss of income. As such, lower levels of income encourage consumers to become more frugal with their money and prioritise the purchasing of basic necessities. Because the demand for labour is deteriorating, consumers have begun to limit food waste, shop more consciously and purchase more sustainable options (Accenture, 2020) expecting that the health crisis will continue to disrupt the economy. As attested by Accenture (2020), there has been a 3% increase from March 19 to April 6 in the number of people doing both fewer and larger shopping trips. Because of this, it means that consumers have become more scarce with their income and have increased their frugality by purchasing g/s less frequently. As a result, consumers have been spending less income in anticipation that the government will delay the re-opening of non-essential businesses, which would cause unemployment rates to continue rising and continue more restrictive consumer spending. Therefore, consumers have been impacted negatively by increasing unemployment rates caused by the government shut down of non-essential businesses.

The health crisis has negatively impacted the revenue of businesses, because of the lack of demand for g/s. This lack of demand for g/s is because of reduced consumer spending and reduced business productivity caused by government regulations. COVID-19 has directly impacted consumer spending overall, with consumers reducing spending on all non-essential goods and services. The NSW Government shut down non-essential businesses in late March (Time News, 2020), causing consumers to prioritise their spending on basic necessities and essential services. As a consequence, the lack of consumer spending and loss of income due to rising unemployment has resulted in reduced demand for g/s. As reported by the ABS (2020), overall business revenue in Australia has decreased by 72% due to COVID-19. The NSW Government ordered all businesses to abide by the following rules; shut down non-essential businesses, maintain social distancing of 2m, work from home if possible and develop a COVIDSafe plan (Health NSW, 2020), to avoid the spread of the virus. As a result, these government restrictions have had a detrimental impact on business productivity, with businesses limiting their staffing and making adjustments to their factors of production to avoid breaking any newly-imposed rules. Another report by the ABS (2020) states that 83% of businesses operating under modified conditions have experienced a decrease in revenue, compared to the 37% operating normally. Evidently, workplace government restrictions have had a negative impact on the productivity of affected businesses and have consequently decreased the overall amount of revenue generated. The reduction in demand for g/s and reduction in business productivity is caused by government intervention. As a consequence of these reductions, it has resulted in major declines in business revenue.

By all counts, and with proven results, the COVID-19 health crisis has had a significant impact on the Australian economy. This health crisis has negatively impacted business revenue, due to lessened demand for g/s because of reduced consumer spending and reduced business productivity. Furthermore, the health crisis has caused a significant rise in unemployment rates and an immediate increase in consumer frugality. The health crisis has directly impacted the productivity of businesses, business revenue, demand for g/s, consumer spending, consumer frugality and has had a severe impact on the Australian economy.