The reality of COVID-19 continues to affect economic growth, as health and isolation measures endure in direct response to the pandemic. Household spending is down on a universal basis, with the economies of Australia and New Zealand severely affected despite relative success in containing the virus. The situation is changing by the day, with leading industry research company IBISWorld publishing an in-depth breakdown of how the pandemic is currently affecting the Australian and New Zealand economy.
COVID-19 has affected Australia and New Zealand in many ways. National governments have spent billions on economic relief packages, unemployment continues to rise, and households and businesses remain scared to invest in their future. The virus has disrupted consumer demand, affected business supply, and reduced consumer sentiment significantly. Weakening demand can be seen across most industries, with only a few sectors managing to thrive in the current economic climate.
According to the report from IBISWorld, households have scaled back discretionary spending due to fears of rising unemployment and economic uncertainty. In addition, businesses have abandoned or postponed investment in new productive capacity in order to retain cash and ensure liquidity during uncertain times. Supply chain disruptions are affecting domestic Australian and New Zealand markets, hindering international business activity, and dampening economic growth.
The most affected sectors in Australia and New Zealand include Accommodation & Food Services; Transport, Postal & Warehousing; Rental, Hiring & Real Estate Services; and Arts & Recreation Services. Despite stronger restrictions in New Zealand during the early days of the virus, the economic impact has been slightly lower due to reduced COVID-19 numbers. The impact of COVID-19 has also affected the Mining and Agriculture, Fishing & Forestry sectors, although in these cases, Australia has fared slightly better than New Zealand.
The reality of household spending during the pandemic is sobering, with people spending much less and habits changing in line with social distancing and isolation recommendations. The situation is affecting everyone, with some households struggling to make ends meet and others choosing not to buy new household items. According to an Access Media International study, over 50% of affluent global households are "profoundly impacted" by the virus, with 35% of households unlikely to undertake any air travel in the next two quarters.
Overall consumer confidence in Australia has dropped considerably in 2020, with numbers dropping even before the pandemic due to the bush fires. According to the last few ANZ-Roy Morgan Consumer Confidence survey reports, consumer confidence dropped from around 112 to 66 points before recovering somewhat to its current level of 91.6 points. Since recovering from its March lows, consumer confidence has decreased by 6% from mid-June levels. Spending habits are also changing on both sides of the Tasman, as social distancing continues to push many consumers to online channels for shopping, communication, food purchases and working arrangements.
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