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The mostly deserted steps of the Sydney Opera House, where scheduled public performances have been cancelled due to the coronavirus. Photo: Reuters

Coronavirus leaves Australian economy facing first recession in 30 years

  • High household debt and a reliance on Chinese demand for its exports leave Canberra acutely vulnerable. Some predict unemployment will hit 15 per cent
  • Australians have little experience of economic hardship – the country’s last downturn was in 1990
Anthony Price’s calendar had been chock-a-block with work for weeks to come. Then the Perth-based entertainer and costume designer watched his gigs evaporate overnight as the Australian government ordered the closure of entertainment venues nationwide. The drastic move was the latest emergency measure by Canberra to halt the spread of the novel coronavirus and the potentially deadly respiratory disease it causes, Covid-19.

“I have zero work at the moment, nothing at all,” said Price, who normally splits his time between performing burlesque shows and making costumes for fellow performers on the entertainment circuit. “I want to work, I don’t want to be on the dole, I’d be happy to go out there and stack shelves or sweep.”

Price, 26, estimated he had lost more than A$10,000 (HK$47,000) due to cancelled events over the next two months alone.

“All I am qualified to do is be an entertainer and be an artist and to not be able to do that is heartbreaking as well, because it’s my passion,” he said. “It’s what I love doing, entertaining people and bringing joy into people’s lives and I can’t do that any more.”

Digital market boards at the Australian Stock Exchange in Sydney. Photo: EPA
Price is among countless Australians suddenly facing unprecedented financial anxiety and hardship as a government-ordered shutdown of large sectors of the economy in response to the coronavirus outbreak sends the country hurtling towards its first recession in nearly three decades.

Amid fears that hospitals could soon be overwhelmed by an exponential rise in coronavirus cases, Australian Prime Minister Scott Morrison announced on Sunday that all bars, nightclubs and adult entertainment venues would be forced to close, while restaurants and cafes would be restricted to takeaway and home delivery. Gyms, beauty salons, tattoo parlours and other businesses deemed to be non-essential have also been shut, while weddings and funerals are being restricted to fewer than a dozen people.

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The country has confirmed about 3,500 cases of the virus that has infected more than 550,000 people and claimed upwards of 25,000 lives worldwide so far, bringing global commerce and travel screeching to a halt.

In Australia, analysts have predicted that unemployment could soar to 15 per cent within months as 2 million people find themselves out of work – figures not seen since the Great Depression – with the biggest job losses expected in sectors dominated by casual workers, such as hospitality, entertainment, tourism and the arts.
Australian Prime Minister Scott Morrison announced on Sunday that all bars, nightclubs and adult entertainment venues would be forced to close, while restaurants and cafes would be restricted to takeaway and home delivery. Photo: EPA

Some of the country’s biggest employers have already sent tens of thousands of workers home. Fashion retailer Premier Investments said on Thursday it was standing down nearly all of its 9,000 employees, while Flight Centre Travel Group announced it was furloughing almost 4,000 workers.

“Many economists think that the Australian economy will shrink by 3 per cent in 2020 at the very least,” said Giovanni Caggiano, an associate professor of economics at Monash University in Melbourne. “I believe this is a conservative estimate, and things could be worse. How much worse? It depends on how quickly the pandemic will be reversed. From an economic perspective, the coronavirus is an unprecedented shock, as it jointly negatively affects the demand side of the economy, the supply side, and financial markets.”

With a global recession under way, Australia’s economy is vulnerable on various fronts. Its household debt levels are surpassed only by Switzerland and it relies on Chinese demand for one-third of its exports.

“We’re more exposed to China and this could be really difficult for China over the next sort of 3-5 years,” said Warren Hogan, a professor of industry at the University of Technology Sydney.

Australia’s coronavirus cases rise, even as Morrison’s plan draws praise

“I don’t think they’ll be sending as many tourists here in the future, and I don’t think they’ll be sending as many students here. I don’t think those industries are going to recover quickly in the next 12 months. I think that’ll take a number of years.”

The government has pledged A$84 billion in stimulus measures to prop up the economy, including payments of up to A$100,000 for small businesses that retain workers throughout the crisis and a one-off payment of A$750 for 6.5 million Australians receiving government assistance.

It is expected to announce another round of measures within days under which banks, lenders and landlords will be asked to waive debt and rent payments to allow businesses to quickly return to normal after the crisis.

The Reserve Bank of Australia has injected A$65 billion into the financial system since mid-March and bought A$19 billion in government bonds since last week amid the rising economic anxiety.

Ian McDonald, an emeritus professor of economics at the University of Melbourne, questioned the effectiveness of stimulus measures that were not focused on replacing lost income.

“The government, as an insurer of people’s well-being, should focus on help to those badly affected by the shock, which is mainly those who lose their jobs because of the shock,” McDonald said. “Wage replacement for those people should be the priority. Making payments to other people who are not losing their income, whether workers or the previously unemployed or old-age pensioners is not appropriate.”

The traffic-free Flinders Street station intersection at rush hour during coronavirus lockdown in Melbourne, Australia. Photo: Bloomberg
Although people around the world are bracing themselves for the economic fallout of the pandemic, most working Australians have little experience of similar economic hardship to compare it to. The country rode out the global financial crisis a decade ago largely unscathed on the back of ferocious Chinese demand for iron ore and coal, and last experienced an economic downturn in 1990-91, an event widely attributed to a sudden tightening of interest rates amid an unsustainable asset boom.

“I think the psychological impact of this, when they start to see mass unemployment, which is already starting to show up here, is going to be very, very difficult,” said Hogan, describing how the economic pain would shock Australians who had been lured into complacency after 29 years of uninterrupted growth.

“Our discretionary spending, our saving rate, our rate of tourism and spending overseas – all of these indicate a society with great confidence in its economic future but I think this event is going to really impact that.”

In an early sign of the pain to come, the MyGov website crashed and long queues formed at Centrelink welfare offices around the country throughout the week as hundreds of thousands of Australians sought to apply for government assistance, many of them for the first time.

Hundreds of people queue outside an Australian government welfare centre, Centrelink, in Melbourne. Photo: AFP

“Anyone in the arts sector and a lot of people in the hospitality industry as well are all trying to get on the dole,” said Price, who waited in line for two hours to apply for government assistance, which was recently doubled to a fortnightly payment of A$1,100 in response to the crisis.

“For things like bills and food, I’ll have to find the money for that, it’ll probably just have to come out of my life savings.”

Photographer Carmel Zaccone was shocked and upset when her employer the Sunraysia Daily, a newspaper in Mildura, regional Victoria, announced it would be printing its final issue for the foreseeable future on Saturday after 100 years in circulation. “I’m very worried about paying bills and rent,” said Zaccone. “Luckily I have a partner who I can lean on at this point in time but it’s devastating to be stripped of your independence.”

People wait for a delivery of toilet paper, paper towels and pasta at a Coles supermarket in Sydney, Australia, after panic buying sparked by the coronavirus. Photo: EPA

Many other Australians who remain employed have had their hours drastically cut.

Kerrie Scoble, who works for a florist in Geelong, Victoria, said her hours had been reduced by more than half from 20 hours a week before.

“I’m promoting my floristry and flowers, and have offered non-contact door deliveries,” said Scoble, 50, who lives by herself in Geelong. “In all this madness, people still need beautiful things in their life.

“It’s such a huge impact on my life, financially and mentally, but I’m not the only one. I’m trying to stay positive.”

For many Australians, the uncertainty is the hardest part.

“No one knows how long it is going to last, and no one knows how long to plan for,” Price said. “We’ve never seen anything like this happen in our lifetime.”

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