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Australia has been significantly impacted by COVID-19. As businesses, government and society focus on the recovery from the initial impact the pandemic has had on almost all aspects of Australia (see Figure 1), it is important to look ahead to recovery from COVID-19 and what the economy and nation will look like in a post-COVID-19 world.
Figure 1 - The four phases of the COVID-19 pandemic - Illustrative
There is a risk that Australians will quickly move forward together in the hope that we return to something similar to our previous ‘normal’ after the 'recovery'.
Such nostalgia would be a mistake; the pace and scale of the shock caused by COVID-19 means that Australia has already changed, and further change is inevitable.
The pace of change triggered by COVID-19 is unprecedented. Some changes are undoubtedly temporary, but there exist a series of forces that will shape Australia over the coming years. How these forces manifest themselves in practice - nature, scale and scope - is in large part a function of the choices that governments, businesses and individuals make over the next months and years. The key forces are described below.
Greater government involvement: In recovery, the government will exert more influence over our lives and the economy than it has in decades; but what form will this take - investor/owner, regulator, or reformer?
Debt and capital: Increased levels of government support lead to higher government debt and interest payments. Access to private capital may also be limited given the uncertain situation, as we grow with a debt hangover.
Consumption behaviour: The “new way of living” will impact consumption behaviours with consumers becoming more cautious and digital. Consumption will reflect changed priorities and new realities with a new generation of cautious consumers emerging.
Accelerated digitalisation and data reliance: Accelerated demand for ecommerce and e-services. Businesses that have or are rapidly able to build robust digital capabilities will be in an enviable position as technology is at the forefront of change.
Productive, flexible and distributed working: Unemployment will be high, and workplace flexibility is a new norm. Increased technological competency means new high tech skills will be required over traditional low skill work and productivity must remain high. There's no going back.
Resilient secure supply chains: Significant disruption affected nearly all layers of the supply chain, highlighting vulnerabilities and revealing exposures of the current local, national, and global supply chains.
Industry consolidation: With such large changes to business models likely, industry structure changes will follow. Some businesses will survive, some will not, and some will fundamentally change- resetting the basis for competition.
Tax reform: the Great Lockdown undermined the government’s ability to raise revenue given the disruption to business and personal incomes, and changed consumption and saving behaviours. With additional government expenditures to support the economy, governments will be challenged to reinvent their tax systems without stifling economic growth.
This report is not related to the Australian Manufacturing Workers Union (AMWU) pre-COVID-19 report of March 2019 titled 'Australia Rebooted' and PwC is not affiliated with the AMWU.
COVID-19 Market Response Leader, PwC Australia
Tel: +61 2 6271 3229
Chief Economist & Partner, PwC Australia
Tel: +61 (2) 8266 4611