An Estimate of the Economic Impact of COVID-19 on Australia

Abstract

In response to widespread concern regarding the ìntensity and duration of economic impacts from the current COVID-19 pandemic, this article aims to inform discussion by (1) identifying the mechanism through which shocks to individual markets are transmitted to the aggregate economy (2) providing plausible upper and lower bounds for impacts drawn from actual economic data for most recent pandemics, and (3) estimating the magnitude of government intervention required to counteract the economic impact of the pandemic. The key finding is that the impact of COVID-19 on Australia’s economy is likely to be deep - a contraction of up to 15 percent of GDP - and require government expenditure of at least $300 billion billion to offset the shocks to the labour market, consumption and investment.

Keywords: COVID19, coronavirus, economy

JEL Classification: E21, H30, I10