Economic Outlook: 30 March 2021

The COVID-19 pandemic has highlighted just how critical a robust biosecurity system is to the health of Australians, the environment, and the competitiveness of key industries. The recently released CSIRO Australia’s Biosecurity Future report demonstrates that transformational change to Australia’s biosecurity system by 2030 will better protect our people and home.

What is the current macroeconomic environment?

Global economic environment

CSIRO scientists conducting research on the COVID-19 virus at the Australian Centre for Disease Preparedness.

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• COVID-19 is in 223 countries/territories with 124,000,000  confirmed cases and 2,800,000 confirmed deaths (WHO, 30 March).
• The IMF projects the global economy will grow 5.5% in 2021 despite ongoing pandemic uncertainty, reflecting expectations of increased economic activity, bolstered by vaccine deployment and additional policy support in some major economies (IMF, 26 January).
• Advanced economies are projected to grow 4.3% and emerging markets and developing economies 6.3% on average. This contrasts with the 2020 global contraction of 3.5%, which severely impacted women, youth, the poor, and informal and frontline workers.
• Until vaccines are widely available, economic recovery will continue to depend on continued monetary and fiscal policy support. Further, inequitable vaccine distribution also risks exacerbating financial vulnerabilities, especially for frontier market economies (IMF, 27 January).
• GDP in the US rose by an annualised rate of 4.1% in the final quarter of 2020, while real GDP decreased 3.5% overall last year (BEA, 25 February).
• GDP was down by 0.6% in the euro area and by 0.4% in the EU in the fourth quarter of 2020 compared with the previous quarter, reflecting the ongoing toll of the pandemic and recent lockdown measures across European countries (Eurostat, 16 February [pdf · 300kb]).
• China’s economy grew year-on-year by 6.5% in the fourth quarter and its GDP grew 2.3% in 2020, making it the only major economy to avoid an overall contraction last year (Reuters, 18 January).
• Interest rates: Eurozone remains at 0%, China at 3.85%, Japan at -0.1%, the US at 0.25%, and the UK at 0.1%.

Global assistance measures for COVID-19

• As of late March, over 400 million doses of vaccine have been given worldwide, although well over half of these doses have been delivered to only high income countries (London School of Hygiene & Tropical Medicine, 18 March).
• However, there has been a recent increase in reported COVID-19 cases, reflecting factors such as a relaxation of public health measures and circulation of virus variants. This reemphasises the continual need for testing, contact tracing, isolation, supported quarantine measures and health care (WHO, 1 March).
• Research systems around the world have responded strongly and flexibly to the pandemic, accelerating trends such as greater access to data and publications, increased use of digital tools, and enhanced international collaboration and public-private partnerships (OECD, 12 January).
• The pandemic has highlighted how research and innovation policies need to be increasingly geared towards long-term challenges of sustainability, inclusivity, and resiliency (OECD, 12 January).
• Globally, there are currently 182 COVID-19 in pre-clinical development, along with 82 in clinical development (WHO, 16 March).
• For a comprehensive and recent global policy response tracker, see IMF, 10 March.

Australian economic environment and assistance measures

• 29,200 confirmed COVID-19 cases and 909 confirmed deaths (Department of Health, 30 March).
• COVID-19 vaccinations have begun in Australia, with people in higher-risk categories – including quarantine and border workers, frontline healthcare workers, and aged care and disability residents and staff – being the first recipients (Department of Health, 21 February).
• GDP rose 3.1% in the final quarter of 2020, compared to the previous quarter, reflecting ongoing economic recovery as restrictions continue to ease across the country. Household spending increased 4.3% while compensation of employees rose 1.5% as employment and hours worked increased (ABS, 3 March).
• Seasonally adjusted employment increased by 29,000 people between December 2020 and January 2021, indicating continued labour market recovery. In January 2021, the unemployment rate decreased by 0.2 percentage points to 6.4% (ABS, 18 February).
• The youth unemployment rate remained at 13.9% in January 2021 (ABS, 18 February).
• Business conditions are improving, although challenges remain. The latest survey data for February indicates 30% of businesses were impacted by reduced cash flow and 28% by reduced demand, compared to 72% and 69% in April 2020 (ABS, 26 February).
• Following Fitch reaffirming its AAA credit rating, Australia remains one of only nine countries to possess a AAA credit rating from all three major credit rating agencies (Treasurer, 22 February).
• The Coronavirus Supplement and the JobKeeper program are scheduled to finish at the end of March.
• JobKeeper payments accounted for $11.9 billion in the December of 2020, down from $35.8 billion in the September (ABS, 3 March).
• The Boosting Cash Flow for Employers measure to support small and medium businesses with operational expenses, accounted for $6.7 billion in December of 2020, while other COVID-19 related subsidies, including those made by state governments, accounted for $3.7 billion (ABS, 3 March).
• The RBA interest rate remains at a historic low of 0.1%.

What are the economic factors related to Australia’s biosecurity system?

Expected and observed economic impacts related to Australia’s biosecurity system

• Several emerging challenges face our biosecurity system, including urbanisation, food security, growing trade and travel, antimicrobial resistance, biodiversity and environmental service loss, climate change, agricultural intensification, data sharing and system connectivity, resourcing, and the commercialisation and social licensing of new solutions.
• Between 2012 and 2017, the annual number of interceptions of biosecurity risk materials at Australian borders rose by almost 50%, to 37,014.
• The net present value (NPV) of national environmental assets was $6.6 trillion in 2017-18, encompassing land, minerals, energy and timber (ABS 2019).
• Biosecurity incursion costs can be significant. As cited in the Australia’s Biosecurity Future report, following Australia’s first case of COVID-19 in late January, GDP contracted $1.5 billion in the March quarter and effective unemployment rose to a peak of 15% in April.
• Invasive pests, weeds, and diseases cost Australia around $390 billion over the last 50 years in control measures. Lost production and losses to the environment are increasing six-fold per decade and currently costing Australia at least $8 billion in direct costs per annum. Approximately 30 new species establish in Australia every year (Bradshaw CJA, Hoskins AJ, Haubrock PJ, Cuthbert RN, Diagne C, Leroy B, Andrews L, Page B, Cassey P, Sheppard AW, Courchamp F).
• According to a 2020 report by the Centre of Excellence for Biosecurity Risk Analysis (CEBRA) [pdf · 2.5mb], the NPV of Australia’s biosecurity system, which protects environmental assets, is estimated to be $314.8 billion over the next 50 years. 
• They estimate Australia’s biosecurity system will generate $325.3 billion in benefits from total damages avoided over the next 50 years, whereas the estimated costs of government expenditure on biosecurity will be $10.5 billion over this period. 
• However, despite a positive NPV over the next five decades, CEBRA also estimates that $346.7 billion in damages from newly introduced pests and diseases will still be incurred. 

Transforming our biosecurity system

• Scaling the current system through additional funding may not be enough. Modelling shows that even almost tripling investment in interventions out to 2025 might still result in increased residual biosecurity risk compared to 2014–2015 levels (Craik, Palmer and Sheldrake, 2017 [pdf · 2.5mb]).
• The Australia’s Biosecurity Future report argues that a transformational trajectory is needed, including a nationally coordinated system with a greater prevention focus, engaged and mobilised communities, improved environmental health, open and bio-secure trade pathways, accelerated technology development and innovation solutions that Australia can export.
• To pursue this trajectory, Australia needs stronger collaboration across governments, industry, research, and the community and improvements in three areas:

1. System connectivity: Improving digitised processes and data sharing and strengthening our domestic and international partnerships to ensure we identify and manage emerging risks as they arise.
2. Shared responsibility: Community engagement in biosecurity responsibility, systemic collaboration with Indigenous organisations, and industry development in surveillance roles to better align incentives.
3. Innovation in science and technology: Supporting innovation through national priorities and driving growth in technology start-ups that create business opportunities for biosecurity to bolster Australia’s science and technology capability for biosecurity.

Australia’s future recovery and resilience

• In the short term the focus is on slowing the spread of COVID-19 and economically protecting Australian households and businesses, while supporting vaccine deployment and related science.
• In the medium term the focus should shift to how science, technology and innovation can lead the Australian economy’s recovery. Medium-term recovery opportunities involve deployment-ready technologies that could have positive economic impacts.
• In the long term the focus should shift to building a resilient economy and reducing Australia’s exposure to future shocks. Long-term resilience involves technologies that are often still in development and demand further investment, technical and commercial testing, and scale-up before their economic potential is fully realisable.

Disclaimer: This document contains general information only, and we are not, by means of this document, rendering professional advice or services. Before making any decision or taking any action that might affect your finances or business, you should consult a qualified professional advisor.