Impact of Covid 19 on Economy of Australia - Economics Assignment Help

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Now, it has been observed from figure 4, that economy of Australia pushed to recession by the adverse impact of COVID 19. It is necessary to bring the economy of the country out from this poor economic condition. In order to do so, the government of the country should take expansionary fiscal policy. Under this policy, the government should increase its spending and lower the tax rate. Because of this policy, the disposable income of people would increase leading to rise in consumption demand Di Bartolomeo, G. and Giuli. As a result, aggregate demand would increase in the country. The government not only provide stimulation to the public only but to the industries as well. This would result in rise in investment in Australia leading to increase in production and thereby aggregate supply would increase. The government should take the help of RBA as well. The RBA would implement expansionary monetary policy which would be implement by cut in cash rate. This would increase borrowing and thereby investment in the country rise. Consequently, money supply in the economy would increase leading to rise in disposable income. This would increase the aggregate demand in the economy further. However, in the short run, the economy would not recover completely as the aggregate demand and aggregate supply would not increase sufficiently. This would shift the respective curve to the right partially in the short run. However, in the long run the curves would shift to far right to AD1 and AS1. Hence, in the long run the economy of Australia would return its full employment level of real GDP.
 

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