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

41 Pages Posted: 26 Jan 2021

See all articles by Geoffrey J. Bannister

Geoffrey J. Bannister

International Monetary Fund

Harald Finger

International Monetary Fund (IMF)

Yosuke Kido

International Monetary Fund (IMF)

Siddharth Kothari

International Monetary Fund (IMF)

Elena Loukoianova

International Monetary Fund (IMF)

Date Written: December 1, 2020

Abstract

While the world is focused on addressing the near-term ramifications of the COVID-19 shock, we turn attention to another important aspect of the pandemic: its fallout on medium-term potential output through scarring. Taking Australia and New Zealand as examples, we show that 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 in the wake of an unprecedented sectoral reallocation, hightened uncertainty, and reduced migration. Maintaining fiscal and monetary policy support until the recovery is firmly entrenched and putting in place a strong structural policy agenda to counter the pandemic's adverse effects on medium-term potential output will be important to support standards of living and strengthen economic resilience in case of renewed shocks.

JEL Classification: E20, O40, O47, O56, E23, J82, D24, E22

Suggested Citation

Bannister, Geoffrey J. and Finger, Harald and Kido, Yosuke and Kothari, Siddharth and Loukoianova, Elena, Addressing the Pandemic's Medium-Term Fallout in Australia and New Zealand (December 1, 2020). IMF Working Paper No. 2020/272, Available at SSRN: https://ssrn.com/abstract=3772476

Geoffrey J. Bannister (Contact Author)

International Monetary Fund ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-9421 (Phone)
202-623-4237 (Fax)

Harald Finger

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Yosuke Kido

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Siddharth Kothari

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Elena Loukoianova

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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