COVID-19 has had a profound impact on the Australian economy. Most indicators in 2020 indicate that the country was in a recession phase. According to Australia Indicators (n.d.), the annual growth rate of RGDP decreased by 1.9%, index of production costs decreased by 0.4%, consumption spending decreased by 5.72%, investment spending decreased by 3.3%. Only net exports increased by $1.8 million because imports decreased by about 15% (Australia Indicators, n.d.). In turn, in 2021 the Australian economy began to recover from the adverse economic effects of COVID-19. During this period, the country’s economy was in the expansion phase. This is evidenced by the increase in such indicators as the annual growth rate of RGDP, consumer price index, index of production costs, consumption spending, investment spending, and net exports. The largest contribution to the 2021 cycle was made by such a component as net exports, which showed the maximum growth compared to other indicators and almost doubled.
In 2020, the Chinese economy has experienced a recession, as evidenced by the decline in indicators such as the annual growth rate of RGDP, consumer price inflation, index of production costs, spending on consumer goods. At the same time, in 2020, China became the only major economy in the world to avoid a significant downturn due to the COVID-19 pandemic. While the economic indicators showed negative coefficients, the annual growth rate of RGDP showed an increase, but less than in previous years. Moreover, indicators such as consumption expenditure, investment spending, and net exports have increased. Net exports rose as disruptions due to the coronavirus around the world fuelled demand for Chinese goods. In 2021, the business cycle of the Chinese economy was characterized by an expansion phase. Thus, the annual growth rate of RGDP increased by 8.1%, the index of production costs increased by 3.7%, consumption expenditure increased by 10%, spending on consumer goods increased by 14.16%, and investment spending increased by 3.9% (China Indicators, n.d.). The biggest contributor to the cycle in 2021 was net exports, which increased by a third compared to 2020.
In 2020, the unemployment rate in Australia was 7.4%, which is associated with a drop in the supply of vacancies in the labor market during the COVID-19 pandemic. However, according to China Indicators (n.d.), the unemployment rate fell to 4.9% in 2021. A likely reason for this may be the stabilization of sectors such as healthcare, social assistance, hospitality, food, science and retail, which were characterized by an increase in the number of vacancies. Accordingly, the increase in the supply of vacancies was able to satisfy the demand and the unemployment rate decreased.
Cyclical unemployment occurs during a cyclical economic downturn. It occurs when a fall in aggregate demand for output causes a fall in aggregate demand for labor. Indeed, unemployment in Australia has been linked to the economic recession caused by the COVID-19 pandemic, so it can be called cyclical. On the other hand, unemployment in Australia can be called structural, since it was associated with technological changes in production, which changed the structure of labor demand. Ghosh and Ghosh (2021) note that if demand for workers in a given occupation or region falls, then structural unemployment occurs. Thus, unemployment in Australia is dual in nature.
In 2021, rising prices for all food and non-food items, as a consequence of supply chain disruptions and higher transport and production costs, contributed to a 5.7% rise in Australian inflation (Australia Indicators, n.d.). Inflation is affected by supply and demand for products and services, as well as import and export performance. Consumption expenditure increased by 5%, index of production costs enlarged by 2.2%, and imports and exports increased by 8% and 19%, respectively (Australia Indicators, n.d.). Thus, the increase in these indicators was reflected in the change in the level of inflation.
References
Australia Indicators (n.d.) Web.
China Indicators (n.d.) Web.
Ghosh, C. and Ghosh, A. (2021) Macroeconomics. 2nd ed. Delhi: PHI Learning Private Limited.