Eight recommendations for economic recovery in Australia

14 June 2020 Consultancy.com.au 4 min. read
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The Covid-19 crisis might pan out in a number of ways for Australia’s economy, but a few objectives can remain constant irrespective of the final outcome. Deloitte Access Economics has put forth eight measures that could make the recovery as smooth as possible. 

No doubt, the economic fallout from the crisis is likely to be significant, with estimates painting a dire picture for the coming months. Deloitte Access Economics has previously modeled possible economic outcomes of the crisis for Australia, laying down three possible scenarios.

In the first ‘mild’ case, Australia loses just under 5% of its GDP, which amounts to nearly $90 billion. In this scenario, investments fall by more than 11%, unemployment rises to 7.5% and population growth slows to 0.9%. In a second ‘harsh’ scenario, the hit to the GDP reaches 5%, amounting to more than $95 billion. Here, investments fall by nearly 49%, unemployment reaches nearly 9% and population growth slows to 0.4%.

Deloitte recommends that Australia should prepare for a harsh scenario, while hoping for a mild scenario. The case to avoid is a third ‘severe’ scenario, where Australia loses nearly 7% of its GDP – $120 billion – and takes a loss of more than 50% to its business investments, with an unemployment rate of more than 9%. The impact on population growth would enter negative figures in this case.Three scenarios based on three key uncertainties, Key ResultsIrrespective of the eventual outcome, however, the researchers point to the fact that the crisis presents a significant opportunity to reform key aspects of the Australian economy, building a solid foundation for long-term economic growth.

“When it comes to Australia’s recovery from the pandemic, we want to encourage governments, business and communities to stretch their thinking, challenge conventional wisdom, identify new opportunities or hidden risks, and make better decisions that will make our country a better place in the future,” said Kristian Kolding and Pradeep Philip, partners at Deloitte Access Economics.

According to their analysis, eight focus areas could ensure that Australia makes the most of its economic opportunities.

Recommendations for recovery

Firstly, Australia’s economy was already stagnating before the crisis, calling for considerable reform. A more open immigration policy, a more relaxed and incentivised business environment, and a consequently budding entrepreneurial landscape are all important reforms that will drive long-term growth.

The second step is to drive the strategic digitalisation of the economy. Virtual working arrangements have accelerated the digital transformation process in Australia, and the researchers recommend collaboration between the government and businesses to ensure that digital enhancement reaches its potential.

Infrastructure is the third focus area. Investing in infrastructure could lower transport and transaction costs and facilitate business growth, while also creating jobs. This includes infrastructure at a regional and local level.

The fourth measure would be to do away with any inefficient bureaucratic processes that might be posing a barrier to business growth. Easing regulations could boost business competitiveness in the country, marking long-term economic growth.

The fifth reform put forward is a shift towards sustainability and self-sufficiency. Australia’s vibrant energy sector is well positioned to become a global leader in renewables – a position that will support economic longevity. Simultaneously, boosting the domestic manufacturing environment could localise the country’s supply chain, which is also a step towards better resilience.

Health reform is the sixth recommendation for change. The crisis has exposed gaps in the social and healthcare systems, which must be filled. The digitalisation of healthcare through virtual diagnostics and care is one area that can be improved upon, making the overall health system more efficient.

Meanwhile, in keeping with greater infrastructure investments, Deloitte suggests that urban centres be planned to accommodate a larger and more diverse workforce in a harmonious and comfortable landscape. Better urban centres with better connections between them will spark a significant economic boon.

The last measure for long-term economic recovery and growth is to re-skill Australia’s workforce. A growing digital skill gap is an issue across the globe, and Australia is among the markets that needs to address the gap. To prevent the high unemployment rates expected in the Covid-19 aftermath while simultaneously preparing the economy for the future, a consolidated drive to promote digital skills in the economy is crucial.