Addressing the Pandemic's Medium-Term Fallout in Australia and New Zealand

IMF Working Papers, December 11, 2020

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Addressing the Pandemic's Medium-Term Fallout in Australia and New Zealand

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Bibliographic details

• Authors: Geoffrey J Bannister, Harald Finger, Siddharth Kothari, Elena Loukoianova
• Published: December 11, 2020
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781513563282.001

Summary

• The paper examines the pandemic’s fallout on medium-term potential output through scarring, using Australia and New Zealand as examples.
• It finds the pandemic will likely have a large and persistent impact on potential output, broadly in line with the experience of advanced economies from past recessions.
• The impact is driven by employment, capital stock, and productivity losses resulting from an unprecedented sectoral reallocation, heightened uncertainty, and reduced migration.
• Maintaining fiscal and monetary policy support until the recovery is firmly entrenched and implementing a strong structural policy agenda are emphasized as important to support standards of living and strengthen economic resilience against renewed shocks.

Key findings and channels of impact

• Medium-term potential output is projected to suffer a large and persistent loss consistent with past advanced-economy recessions.
• Primary drivers of the potential output decline:
  • Employment losses.
  • Capital stock losses.
  • Productivity losses.
• Contributing factors to these drivers:
  • Unprecedented sectoral reallocation.
  • Heightened uncertainty.
  • Reduced migration.

Policy recommendations

• Maintain fiscal policy support until the recovery is firmly entrenched.
• Maintain monetary policy support until the recovery is firmly entrenched.
• Put in place a strong structural policy agenda to counter the pandemic’s adverse effects on medium-term potential output and to support standards of living and economic resilience.

Publication and metadata

• Publication title: Addressing the Pandemic's Medium-Term Fallout in Australia and New Zealand
• Authors: Geoffrey J Bannister, Harald Finger, Siddharth Kothari, Elena Loukoianova
• Publication date: December 11, 2020
• Series: IMF Working Papers, Working Paper No. 2020/272
• Pages: 40
• Volume: 2020
• Issue: 272
• DOI: https://doi.org/10.5089/9781513563282.001
• Stock No: WPIEA2020272
• ISBN: 9781513563282
• ISSN: 1018-5941
• Subjects: Economic sectors, Financial crises
• Keywords: advanced economies, Australia, COVID-19, New Zealand, Potential output, scarring

Source: IMF Working Papers, "Addressing the Pandemic's Medium-Term Fallout in Australia and New Zealand" (Working Paper No. 2020/272).

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