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CORONAVIRUS – The situation in Australia

1. General situation

With a total population of approx. 25,5 million people, Australia has not presented a widespread community transmission of COVID-19: on 22 July 2020, there have been 12.896 confirmed cases (with 214 people currently admitted to hospitals); 128 have died and 8653 have been reported as recovered; approx. 3.651.000 tests have been conducted across Australia. During the last 10 days Melbourne (city capital of Victoria) has been facing a second wave with 300-400 new cases per day and is currently in lockdowm (at least till mid-August).

Travel ban to Australia will be in place for several months to come.

2. Preventive measures

The federal government’s initial response has been based on a full community lockdown of non-essential services (including schools), effective social distancing, health system capacity increase, isolation of people with the virus and their close contacts. During the last two weeks most of the States (Australian Capital Territory | Canberra New South Wales | Sydney, Northern Territory | Darwin, Queensland | Brisbane, South Australia | Adelaide, Tasmania | Hobart, Western Australia | Perth) lifted the restrictions, but State of Victoria is keeping its interstate borders closed and Melbourne is back in lockdown because of virus outbreaks at several hotspots (possibly triggered by outbreaks at hotels hosting quarantined Australians who recently came back from overseas). Because of the recent surge of positive cases in Victoria, other States could consider to reinforce previous restrictions.

Generally it is still mandatory for employees to work from home (at least till end of July), unless the company operates in an essential sector (public services, utilities, transport, food & beverage, etc.).

Australia’s borders are closed and only Australian citizens, residents and immediate family members can travel to Australia (mandatory quarantine accommodation for 14 days upon their arrival). Moreover, there is a ban on all overseas travel

The Australian borders will stay closed for several months (possibly at least till November, in order to prevent foreign travelers to infect the Australian population. Once re-opened, a 14-day quarantine can be expected.

3. Exit strategy

Australia's COVID-19 restrictions will relax only gradually and with differences between states. All Governments committed to expand the testing regime and improving contact tracing capabilities (Government app COVIDSafe has been downloaded by more than 7 million Australians).

4. Economy

a. Economic impact

After 28 years of GDP growth, Australia will have to face a recession: the IMF expects the real GDP to shrink by 6.4% throughout 2020 (jumping back to positive in 2021 with an estimated 6.1).

The worst affected sectors are tourism (average 8,5 million foreign visitors per year) and hospitality, education (Australian universities and schools host more than 720,000 international students), agriculture, wholesale of basic materials, housing and real estate. Sectors with expected growth are food & beverage wholesaling and retailing, DIY products, online retail, consumer electronics.

b. Trade barriers 

No specific import restriction.

Possible for fresh food to enter upon presentation of electronic copies of the export certificates (instead of usually mandatory paper copies with original stamps).

A trade impediment is represented by the reduced air-cargo capacity to / from Australia due to the ban of passenger flights (usually carrying most of the airfreighted goods to Australia). All delivery couriers suspended their services. The Australian Government allocated funds to increase the number of cargo flights to support exports. Ships can enter Australian ports to unload the cargo, but the crew is not allowed to disembark. Therefore there is a shortage of some products on the shelves of retail shops.

The Australian Government reduced the threshold for foreign investments to AU$0 (from AU$250 million before COVID-19 spreading), meaning that a dedicated board will review every single investment proposal to protect national companies from hostile take-overs. To be confirmed when this restriction will be removed (also in view of the FTA negotiations between the European Union and Australia).

Botst u buiten de EU op handelsbelemmeringen of andere problemen op het vlak van markttoegang? Laat het ons weten via handelsbelemmering@fitagency.be. Wij analyseren uw aangifte en maken die via de geijkte kanalen over aan de bevoegde instanties.

c. Measures for economic relaunch

  • The Australian Government moved fast in providing financial “comfort” to businesses (specifically SMEs) and the many Australians who lost their jobs in the last 4 months.
  • The assistance to individuals includes income support payments, payments to support households and temporary early release of superannuation.
  • The government aims at supporting businesses to manage cash flow challenges (temporary cash flow support of up to AU$100,000 for eligible small and medium-sized businesses, and not-for-profits) and retain employees (the JobKeeper payment helps businesses to cover the costs of their employees’ wages with a fortnightly payment of AU$1,500; this assistance has been extended from September 2020 to March 2021, but with reduced financial contribution and more stringent eligibility criteria).
  • The Australian Taxation Office is open to tailor solutions for owners or directors of businesses that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals.
  • The government will provide a guarantee of 50% to SME lenders to support new short-term unsecured loans to SMEs (this scheme will guarantee up to AU$40 billion of new lending).
  • Please visit https://treasury.gov.au/coronavirus to have a broad view of the AU$259 billion (representing 13.3% of annual GDP) economic response to the situation
  • The Reserve Bank of Australia approved a cash rate cut to 0.25%, down from 0.75% in February 2020.
  • RBA has put in place a comprehensive package to lower funding costs and support the supply of credit to the economy, including a Term Funding Facility to lower funding costs for the entire banking system so that the cost of credit to households and businesses is low, and to provide an incentive for lenders to support credit to businesses, especially SMEs. Please visit https://www.rba.gov.au/covid-19/ for an overview of RBA packages.

d. Economic outlook

Federal Treasurer unveiled Australia's largest budget black hole since World War II, with the deficit reaching almost $86 billion in 2019-2020 due to the effects of the coronavirus pandemic (this compared to a $5 billion budget surplus that was forecasted last December last year). The deficit is projected to grow even further this financial year, with the Government forecasting a blowout of more than $184 billion in 2020-2021. The Government expects net debt reached $488 billion at the end of June, but this has been estimated to grow beyond $677 billion (equivalent to almost 36% of gross domestic product) this financial year. Gross debt was $684 billion at the end of 2019-2020 and is tipped to be almost $852 billion in 2020-2021. Income from tax fell $31.7 billion in 2019-2020 and the Government expects a $63.9 billion decline this financial year, outlining a very challenging fiscal position despite Australia is still in a stronger and more resilient position than most of other countries.

The official unemployment rate is at 7.4%, but that fails to account for people attached to jobs thanks to the Government's JobKeeper wage subsidy, or people who have left the workforce. Without the Government's economic support, unemployment would have been five percentage points higher. Treasury is predicting the unemployment rate will be above 9% by the end of this year.

Despite the federal government allocating a huge amount of money to assist companies and employees, there will be repercussions on the domestic market, international trade and exports (mostly raw materials and natural resources to Asian countries). Growing concerns are related to China stopping imports of beef and threatening to reduce coal and iron ore imports from Australia, and advising Chinese people not to travel to Australia or to study at Australian universities. 

The steep increase of unemployment will lead to a reduction of household spending.

e. Short term opportunities 

Online services (including e-commerce and home delivery) are emerging as the big winners of the current situation. The work-from-home experience generate the need to develop new “team working” software, and the education industry needs to boost its ability to provide improved online services and educational-technology solutions.

f. Long term opportunities

The government wants to boost domestic manufacturing, reducing the high dependency on imported goods (starting with PPE and possibly pharmaceutical products), but there are some concerns due to the local high wages, skills shortages, energy cost, market size, etc. Nevertheless, there could be export opportunities for a broad range of machinery.

Supply-chain improvement, with government projects to support smart logistics and intermodal hubs.

5. Useful links

6. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

23 juli 2020