When nations across the globe went into pandemic lockdowns earlier this year The Economist newspaper coined the term “90 per cent economy” to describe what would be left once restrictions were lifted.
Australia has dealt with the health crisis better than most countries but our economic decline was largely in line with that prediction. At the end of June, the quarterly output of the Australian economy was about 92 per cent of what it would have been if growth had continued as normal, uninterrupted by the coronavirus outbreak.
A recovery is now under way, but the Reserve Bank governor, Philip Lowe, warns the pandemic has taken an unusually haphazard toll. “All recessions are uneven, but this one has been especially so,” he said this month.
Under the best-case scenarios, where a COVID-19 vaccine becomes quickly available and pandemic restrictions ease, it will be some time before important industries such as international tourism and education are revived.
Veteran forecaster Chris Richardson, from Deloitte Access Economics, doesn’t expect the economy’s production to get back to what it was at the end if last year until late 2021 or early 2022. He says our economy will be at least 3 per cent permanently smaller than it would have been had the pandemic not happened.
Even so, maintaining a bit over 90 per cent of the economy’s output in the face of a deadly pandemic has been quite an accomplishment.
In a way we’re fortunate the coronavirus outbreak happened in 2020 rather than in 2000 because, even two decades ago, the economic damage would likely have been far more severe.
Technologies that facilitate remote work have allowed millions to keep doing their jobs during the crisis. A study by the consultancy AlphaBeta, a part of Accenture, found the tools that enable remote work and collaboration permitted 3.2 million Australian employees to keep doing their work safely during the pandemic, including about 1.6 million who may have otherwise been unable to do any work at all. That’s a vast amount of economic output that would have been lost before remote working became possible on a mass scale.
At the same time, online shopping has helped keep our homes stocked with goods during the pandemic, delivery apps have made it easy for us to keep eating meals from our favourite restaurants at home and the digital delivery of movies, apps and music have kept us entertained.
But the strange circumstances of the 90 per cent economy will have lasting consequences. The adjustments made to sustain economic activity during the pandemic have altered the behaviour of businesses, workers and consumers.
Take businesses first. There has been an astonishing acceleration in the use of digital technology during the past seven months. AlphaBeta’s research found Australian companies have, on average, increased their adoption of some digital technology during the COVID-19 period by as much as the previous 10 years. The uptake of digital collaboration options, such as video-conferencing, has been especially swift. Most businesses intend to continue using these new tools and practices after the pandemic has passed.
Associated with this shift has been the vast, unplanned experiment in working from home. Before the pandemic Australia had been something of a laggard when it came to remote work. On the day of the 2016 census only 4.1 per cent of non-farm employees reported working from home, only marginally higher than in 2006.
But this year a legion of employees had their first taste of working from home, and many liked it.
A survey published last month by Sydney University’s Institute for Transport and Logistics Studies showed three in four workers believed that, post-COVID-19, their employers were more likely to support work from home than they did before the pandemic. A separate study by Swinburne University researchers John Hopkins and Anne Bardoel found three in four managers now believed their staff would do more remote work after the pandemic than before it.
The office isn’t dead. But the evidence suggests things won’t go back to the way they were.
Professor David Hensher, the director of the Institute for Transport and Logistics Studies, says the “new normal” for how Australia’s workforce balances time spent working from home versus time at the office might not become apparent until late next year. But he anticipates a substantial fall in work-related travel around big cities with major implications for the use of transport infrastructure, demand for office space and the character of our central business districts.
“There will be a decline in activity around our CBDs but quite a bit of that will relocate to the suburbs,” he said.
Meanwhile, the pandemic has been altering the way we consume and spend. A recent survey by the McKinsey consultancy found a majority of Australians had tried “new shopping behaviours” since the onset of the pandemic and most intended to continue with them. While many old spending behaviours will return once health risks fade, new habits picked up during the crisis will persist. That will also have sweeping repercussions.
The coronavirus-induced downturn has changed the way businesses, workers and consumers behave. Our economy will be fundamentally different as a result.
Source: Thanks smh.com