Economic Essentials for Business

Table of contents

Table of contents:

Introduction:

How Corona has impacted world economies explained through the economic concepts.

Circular flow of income and the Australian economy in the context of Corona Pandemic.

Key economic indicators in Australia.

Current crisis and the Australian economy.

Conclusion:

References:

Introduction to Economic Essentials for Business

Lockdown has been having severe impacts on the world economies. Labour which is seem as an important resource in the production activities consists of human beings and this Corona virus or Covid-19 as they call it, is a serious disease that can deplete the labor resource of the countries and if the countries fail to lock down during this period, they would face serious loss of labor resources in their country. As the vulnerable groups in the situation includes both the youngsters below the age of 10 and the older people above the age of 60, there is a higher chance that if we lose portion of the youngsters, that we are in the tradeoff for current labor and production activities by sacrificing the lives of the younger people.

How Corona Has Impacted World Economies Explained Through the Economic Concepts

Governments of various countries are faced with the tradeoff between economic activities like production of goods and services, and the safety of the people who has to be prevented from the pandemic impacting them. People are expected to stay at their homes to prevent the spread of the disease and by doing so, there is a tradeoff of conducting economic activities of production and consumption of goods and services and saving the lives of the millions of people. The world has certainly changed over the last three months as it has been affected by the Covid -19 pandemic which can kill and severely impact quite a large number of human lives being lost.

Due to the lockdown, as there is no or less production activity across the countries, the scarcity of essential goods and services that are required by the people to survive are not available in plenty. Since there is a tradeoff between the economic activity of production and the savings of the human resource in the context of the corona pandemic, the opportunity cost of staying at home to save their lives is very high instead of involving these working age population of each country in production activities(Sloman & Wride, 2009).

Circular Flow of Income and The Australian Economy in The Context of Corona Pandemic

Till date, Australia has 6894 cases of corona impacted persons, out of which nearly 6040 have recovered. The total cases which are active today in Australia (7th May) is at 757 persons. The health measures taken by the Health department in Australia has saved millions of people from getting impacted from the Corona Pandemic.

The first case of Covid-19 in Australia was found on 25th January of 2020. Since then the Australian government has taken several measures starting with the restrictions on international travel from the date of 1st February and has imposed several social distancing measures that required many of the businesses to close down their operations since March. These measures are expected to be in prevalence till six months at least(Mankiw, 2009).

The various measures that are taken by the Australian government are discussed as under:

As healthcare measures, the Australian government has launched a tracking app and expanded testing criterial which would include even people with mildest of symptoms for Covid-19. The government has expanded its national minimum testing criteria which included the testing of 704000 tests done till date in the country. In the light of covid pandemic, the Australian Government has taken various measures like easing restrictions on surgeries, expanded funding to telehealth services that would help both in social distancing and also taking care of the health patients.

There is a increased level of support provided by the Australian Defence Force. There has been temporary suspension of all semi-urgent surgeries and suspension of non-urgent surgeries both across the private and public health systems. All these health measures would help in protecting the people of the nation from getting affected by the pandemic by increasing the social distancing measures. Apart from this, the government has funded many research projects that would help in COVID-19 testing and treatment.

With regard to restrictions on the movement of people, the public gatherings are limited to two people and all the outdoor recreation facilities have been closed. The social distancing measures are to be in place for at least another six months and there have been restrictions on social gatherings, and non-essential events(Farr & Karp, 2020). The places of worship and churches have been allowed to conduct live streaming services and also there have several border measures like closure of international borders except for its citizens and required all the returning travellers to isolate themselves in designated facilities for a period of 14 days.

In explaining the above measures with the circular flow of income diagram, we can say that there have been several leakages and injections of funds into the economy to keep the system in place and to revive the economy soon after the lockdown.

In the above diagram, we have the circular flow of income where the economy is closed and the money or the income is circulated between the hosueholds and the businesses wihtout additional funds entering the system as injections or exiting the system as leakages. However, there is a additional component in the above diagram with governmental spending where the money is being injected into the economy to make the economy survive the lockdown and to revive the economy soon after the lockdown. Due to the corona pandemic, the circular flow of income is affected terribly as the households are not supplying their factor inputs and the business are not producing the goods and services due to the lockdown. Seeing the restrctions placed on the circular flow on income due to lockdown, the government has taken several measures to inject money into the health and education sector by providing them funds and also providing funds to the small business to survive the lockdown(Policy, n.d.).

Key Economic Indicators in Australia

In the economy, there are several macroeconomic indicators that tell about the health of the economy. These include the GDP growth rate, inflation rate and unemployment rate. This is shown using various graphs for the Australian economy for the last twenty years(RBA, n.d.).

Indicator Name

GDP growth (annual %)

Unemployment, total (% of total labor force)

Inflation, GDP deflator (annual %)

1999

5.1

6.9

0.4

2000

3.9

6.3

2.6

2001

1.9

6.7

4.6

2002

4.0

6.4

2.9

2003

3.0

5.9

3.1

2004

4.1

5.4

3.3

2005

3.2

5.0

3.8

2006

2.8

4.8

5.1

2007

3.8

4.4

5.0

2008

3.7

4.2

4.5

2009

1.9

5.6

5.0

2010

2.1

5.2

1.2

2011

2.5

5.1

6.3

2012

3.9

5.2

1.9

2013

2.6

5.7

-0.1

2014

2.5

6.1

1.5

2015

2.2

6.1

-0.5

2016

2.8

5.7

-0.5

2017

2.4

5.6

3.7

2018

2.9

5.3

1.9

2019

 

5.3

 

Current Crisis and The Australian Economy

The GDP growth rate is fluctuating between 2 to 4 percent over the last ten years. We can see that the GDP growth rate has reached its lowest at 2% during the global financial crisis in 2009 and again it started rising again to 4% during 2012. However, the GDP growth rate has been below 3% from the year 2013. After the Corona lockdown, we can expect the GDP growth rate to go down even further. Even the advanced economies like Australia, would face huge recessionary trends and even depression and hence it is necessary for the government to revive the economy from the depression as there would be no motivations for the households and businesses to take up economic activities of production and consumption with lack of income due to lockdown.

Similarly the unemployment rate which was fluctuating around 5 to 6% during the last ten years, we can expect the unemployment rate to reach 9 or 10% soon after the lockdown as most of the small businesses would not be able to survive the lockdown pressures. And the inflation rate which is indirectly related to unemployment as given by the Philips curve, one can expect the inflation to reach negative levels as when the unemployment levels increase, the inflation level in the economy decreases or even becomes negative with high levels of unemployment.

For the protection of businesses and households, the Australian Government has taken several measures like provision of wage and income support by introducing wage subsidy, provision of second payment to beneficiaries, pensioners, and people who are on health cards. There are substantial governmental investments to introduce a range of measures which would provide relief funds for tourism, education and other industries which are bound to be affected by the pandemic lockdown. The government has developed a mandatory code of conduct for leasing commercial properties, and has introduced and expanded cash grants and hardship support for the small business enterprises.

Conclusion on Economic Essentials for Business

In the fight against Corona virus, world economies and their governments are taking several measures to protect the lives of the people and are also striving to revive the economy soon after the lockdown. There are substantial government spending in the various sectors of the economy in order to boost the economic activities as this would promote private spending through the multiplier effect.

References for Economic Essentials for Business

Farr, M., & Karp, P. (2020, April 3). Australia’s major measures to tackle coronavirus are now in place, Scott Morrison says | Australia news | The Guardian. https://www.theguardian.com/australia-news/2020/apr/03/australias-major-measures-to-tackle-coronavirus-are-now-in-place-scott-morrison-says

Mankiw, N. G. (2009). Macroeconomics.

Policy. (n.d.). COVID-19 Policy Watch | Tracking governments’ responses to the pandemic. Retrieved May 7, 2020, from https://covid19policywatch.org/policies/australia

RBA. (n.d.). Statistics | RBA. Retrieved May 7, 2020, from https://www.rba.gov.au/statistics/

Sloman, J., & Wride, A. (2009). Economics (Seventh).

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Economics Assignment Help

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