Jason Murphy: Coronavirus Crisis Could Leave Australia Better Than Many Other Nations

COMMENTARY:

Economist Jason Murphy explains why Australia could fare better than rich nations, including New Zealand, once the coronavirus pandemic has passed.

Congratulations Australia. You have handled this pandemic well. Pretty good actually.

We have had very few cases compared to other rich countries, and our closures, in most states, have worked perfectly.

The advantage is that our economy has contracted much less than most other countries, as the following graph shows.

There are only a handful of countries that have done better than us: China, South Korea, and a few others. At the other end of the spectrum are Spain, the United Kingdom, France, etc. We are beating them by miles.

A recession, yes. But not as deep as the rest of the world. We have even done better than NZ so far. Better than Sweden too. And our outlook is much more pleasant: summer is coming. But Europe and the US are sliding into winter with high levels of the virus in the community. We can dream of a vaccine before next winter, while they cannot.

The Australian situation is really a good point. Our most recent unemployment figures were much better than expected and Commonwealth Bank improved its GDP forecast for the full year. Now we are likely to see a contraction of the economy of just 3.3% overall this year.

Australia was already close to being the richest country in the world, as the following graph shows. There are only two really big countries that are richer than us: Germany and the United States.

Australia slowly got rich. We dodged the recession for almost three decades and gradually moved up the world rankings. Now once again, it seems like we’re avoiding the worst and coming out of this looking better again.

It seems likely that the events of 2020 will bring us even closer to the top of the charts.

Macao is the richest country in the world, according to World Bank data. The average citizen has nearly $ 130,000 to play with each year. But it might fall out of position for a while. Not because he mishandled the pandemic. No, he has only had 46 cases. The problem in Macau its entire economy is based on Chinese tourism.

According to The Economist Intelligence Unit, a consulting firm, the Macau economy is expected to contract a staggering 63% this year. And it was in recession even before the pandemic, ever since China cracked down on the rich who play there.

A couple of Middle Eastern countries ahead of us in the world rankings have been devastated by viral outbreaks. Qatar has had 123,000 coronavirus cases. That’s five times as many cases as Australia, despite having a population of one-tenth of us. Meanwhile, the United Arab Emirates (UAE) have had 87,000 cases, about 3.5 times more than us, despite a third of the population.

The United Arab Emirates is the country that contains the city-monarchies of Dubai and Abu Dhabi. They originally got rich on oil, but have been trying to diversify. Remember when oil prices briefly turned negative in April? That is bad news for those Gulf countries.

But the problem for its economy does not end there. Emirates airline is owned by Dubai, while Etihad airline is owned by Abu Dhabi. Its economy has been greatly affected by the drop in travel.

European countries have also been hit hard by the virus. Although places like Norway have done very well, their economy is interconnected with places like France and the United Kingdom that have done quite poorly. We may not outperform Ireland and Switzerland, but Belgium, Sweden and Germany are likely to regress in the next few years.

Australia receives a lot of criticism for not having a sophisticated economy. We dig up things, educate foreigners, and do real estate. That is the criticism you hear. But it turns out that as long as you get those things right, the important thing is to avoid deep recessions. In recessions, countries’ economies regress and can damage economic well-being for a long time. Australia will live with the effects of 2020 for a long time. But those effects will be much worse in other countries.

We can be pleased to have put together a good set of policies to fight the virus and some powerful plans to help prevent the economy from collapsing. The policies the government announces in next month’s budget (October 6) will help determine whether we continue to move forward or if we fall behind.

– Jason Murphy is an economist. He is the author of the book Incentivology.