Economics Assignment: Impact of COVID-19 on Australian Economy
Task: The economics assignmenttask is a written analysis of any published news story regarding the Australian Market (newspaper, magazine or website) from 01 May 2021 and onwards. Your task is not to research and provide data. You are instead asked to analyse an ordinary event using your knowledge of economic principles. You will be required to apply the economic concepts you have learned to interpret events reported in your news story.
Event reported in the article:
Present economics assignment has been done considering the report published by the nzherald.co.nz dated 10th august on their online portal regarding crippling lockdown impact on the Australian economy due to Covid19 (Rees 2021). The article has highlighted two important factors; firstly, it has demonstrated the impact of lockdown on the economy of Australia due Covid19 and how further lockdown can hurt the economy of Australia. Secondly, the article has demonstrated the situation of vaccination of Australia and provided glimpse of glacial pace of the programme.
For the purpose of analysis, I have chosen the article as it of highest interest for me that to check on the economic impact of the Covid19 pandemic and to track the vaccination situation in Australia. This analysis has will provide me good scope to analyse both of my point of interest in present day and hence I have considered the article.
Reported service significance to Australian economy:
Through the article, though majorly the overall economic situation of Australia has been demonstrated due to Covid19, however, the article also highlights the vaccination market too. Hence, as the major event of analysis, here the event of vaccination has been considered.
Major product of analysis, vaccination has been considered here as it is of major significance at present time towards Australian economy. As per Australian government until 70% citizen of the state are fully vaccinated, economy cannot go to phase B where Covid19 restriction are relaxed (Rees 2021). Hence, analysing the vaccination market is of most importance during present time.
Parties involved in the event:
Major parties involved in the event are government, producer of vaccines and all citizen of Australia. Australian government here performs the role of mediator and supplier too, who procure vaccine from the producers and then distributes and inject the same to the consumer. Thus, major players are three, which are government and producers who jointly acts as the suppliers and citizen who are willing to take vaccine are the consumers (Lim et al 2021, p5(4)).
Determinants of market demand for chosen event:
Covid19 is a global pandemic and it has impact on every person around the world. It has impacted the economy of every country and thus, the event discussed here has high impact on the third parties too. Apart from the economic event of vaccination in Australia for the Australian citizen has high impact on the different entities (Bishop and Day 2021, p2(3)). As the major impact of the event it can be seen that Australian economy which has been facing -4.4% growth rate in 2020, has faced a -3% growth in 2021 due to slightly increased international trade(Lim et al 2021, p5(4)).In order to overcome the situation, vaccination has been must and the government of Australia is trying to complete 70% vaccination as fast as possible. However, there are people who are not willing to take vaccinations too due to lack of unavailability of the information. In this regard, it can be mentioned that there are various factors that people. Ranging from factors like information availability of the consumers, availability of alternatives, preference, efficacy of the vaccine, price and income are the major determinants of demand.
- Information availability: Higher information availability regarding vaccination process and centres will lead to higher demand of the same.
- Availability of alternatives: With higher alternatives availability there will be less demand of individual vaccine leading; however, though the aggregate demand will increase, but individual vaccine demand will fall.
- Preference of vaccine: Consumer preference can lead to change in the demand of the vaccine and it will be influenced largely by the efficacy of vaccine.
- Efficacy of vaccine: With higher efficacy of the vaccine, demand of the same tends to change.
- Price and income: Though the vaccination is done free of cost as of now by the government, if in future it is being charged, then price of the vaccine and income status of citizen will be the main determinant of demand of vaccine.
Determinants of market supply for chosen event:
Considering the industry size, if three sectors of Australian economy is considered, then it can be seen that primary sector contributes 1.9% to the Gross Domestic Product (GDP) of the state, 26% is of GDP is contributed by the secondary sector and 66% of GDP is contributed by the tertiary sector (Lowe 2019, p20(3)). However, when competition is considered, then the inter industry competition within the industry is very low and rather they are supportive in nature that aids to enhance the business of each other.One the other hand, when it comes to, vaccination, then Australian government here acts as the supplier of the product, which is vaccines and consumer here are the citizen of Australia. It can be seen that factors likeresource price, efficacy of the vaccine, availability of suppliers, time of supplying, economic situation of state are the major factors that influence the market supply.
- Resource price: If the price of the vaccination become high by the producer, then government need to think about its usage leading to fall in supply in the market and vis-à-vis.
- Efficacy of the vaccine: If the vaccine is effective, then its supply will be higher as more people will demand the same.
- Availability of the suppliers: Higher the number of suppliers approved by Therapeutic Goods Administration (TGA), higher the availability of vaccines will be (Tga.gov.au 2021).
- Time of supplying: Lesser the amount of mass-producing vaccine will take, higher the amount of supply of vaccine will be.
- Economic situation of state: Though GDP and economic state is a macroeconomic variable, however, it influences the several other microeconomicvariables in an economy. For instance, higher economic situation will represent higher wage, price of the goods and services and higher demand that lead to higher aggregate supply in the market (Alam et al 2020, p12(3)).
Market power analysis:
Australian government here acts as the supplier of the product, which is vaccines and consumer here are the citizen of Australia; thus, demand is produced by the consumers. Here market of the vaccine is monopoly in nature which is completely controlled by the government and no private entity is there. Hence, market power of government is very high; however, as the vaccination is a voluntary effort, thus government cannot force anyone to take jibe of vaccination (O’Sullivan et al. 2020, p134(4)). On the other hand, consumers under monopoly market structure, often do not have high power to control, however, here, as the vaccination is done one the basis of social cause, thus, consumer power is moderate.
Moreover, ability to decide which vaccine to take by the consumer provides consumer higher bargaining power, although as there is no price of the vaccination borne by the consumer, thus market is not influence from shifting from one vaccine to another by the consumer. Here, it is important to mention that, when a vaccine shortage situation arise, then the government has higher market control as it can regulate the vaccination program accordingly; whereas, consumers has no choice but to follow the rule by government (Thatcher et al. 2020, p188(2)).
Elasticity of the event being analysed:
Elasticity of the vaccination program in Australia is inelastic in nature. As the event is necessary event and mean of survival, thus, even if there is change in price of the same, demand will not be influenced to a great extent. Moreover, change in other demand determinant factor cannot lead to significant change in the demand and thus the elasticity of the vaccination is inelastic in nature.
Industry description and market structure analysis:
Size of industry and level of competition:
Through the article, though majorly the overall economic situation of Australia has been demonstrated due to Covid19, however, the article also highlights the vaccination market too. Hence, as the major event of analysis, here vaccination market has been analysed. As per TGA, Australia has three major suppliers of vaccines, which are Spikevax from Moderna Australia Pty Ltd, Vaxzevria from AstraZeneca Pty Ltd and Comirnaty from Pfizer Australia Pty Ltd. As per health.gov.au (2021), there will be 50 million vaccine production by AstraZeneca, 25 million vaccine doses from Moderna and Pfizer will supply 95 million doses and supply them in two batches of 10 million and 85 million in Australia (health.gov.au 2021). All these vaccination production and procurement comes under government supervision through Australian vaccine agreements with the different producers. Thus, market is fully controlled by the government and competition among the producers are limited when it comes to selling the products(health.gov.au 2021). However, very high competition can be observed among the producers when it comes to producing most suitable vaccine for the Australian population as faster the production of good vaccine is there better the scope of getting order of higher supplies of vaccine doses(health.gov.au 2021).
On the other hand, when market size is considered, then it can be seen that the whole Australian population is prospect consumer for the producers as the vaccination is necessity for surviving the pandemic. Thus, market size is huge in front of the producers.
When it comes to market structure, then the vaccine market can be considered as the monopoly market, where the government is the lead supplier and all citizen of Australia is considered as buyers. Though the market here is monopoly is structure, yet the market operates without any cost. Providing health support and standard livelihood lies within the responsibility of the government and thus the whole cost of vaccination programme is borne by the government of Australia (Churchil 2021, p 783(3)). Covid19 vaccination is free and voluntary approach where every citizen of Australia is entitled to get free vaccine from the health centres.
Regulatory authority of the industry:
As the prime regulatory authority of the whole vaccination program, Australian government department of health, state and territories health department are responsible. These organisations along with the healthcare institutes and clinics has developed various resources to regulate the vaccination program in Australia. Besides, there is TGA who looks afters the trial process of the vaccine and provide accreditation on successful testing for implementation in Australia.
TGA has been given capability to accept of reject the vaccines in Australia and hence, TGA has the highest authority on the vaccination(health.gov.au 2021). On the other hand, other government agencies like department of health of Australia, state and territories health department looks after the implementation process of the vaccine. Hence, these regulators also have power to influence the whole vaccination program in Australia.
Third party industry group for regulating behaviour of industry:
Apart from the aforementioned regulators, there is WHO, that directs the Australian government and local regulators with valuable information regarding the vaccination for Covid19. As the major third-party regulator, WHO is responsible for promoting awareness, vaccination drive and influence the people of state to vaccination for protecting themselves from the Covid19.
Third parties affected:
Australian vaccination program has increased the international trade and event has impacted the export of the goods and services from the Australian market to international market resulting impact on livelihood of the trade related people of different states too. Apart from this, as per the impact of the event third parties like tourism enthusiasts, students, and people connected with the tourism and education system in different state has also been impacted(health.gov.au 2021). There has been fall in net migration towards Australian economy and this has impacted the interest of the skilled workers who were supposed to enter the Australian workforce from international market if there were no Covid19 and lockdown situation (Rees 2021). Thus, it can be stated that people from internal market who are skilled workers are also the impacted third parties. Manufacturing and service sector of Australia is also impacted due to the Covid19(health.gov.au 2021). Hence the suppliers of the raw materials, intermediate goods and services of the Australian manufacturing and service sector can also be considered as the third parties who are impacted by the Covid19(health.gov.au 2021).
Impact to the third party of the event:
Covid19 has resulted in month long lockdown in the Australia and it has resulted in a crippling blow to the Australian economy. It has not only impacted the domestic economy, as well as hampered the third parties negatively too who are indirectly attached with the Australian economic situation. As per the (Lim et al, 2021, p7(4)) it can be seen that the net migration has been deteriorated by a great extent where the migration rate has fell from 1.5% to merely .2% during 2021. This fall in migration has been mainly germinated due to the fall in short term tourist visits and fall in international students who came for higher studies in Australia. As per (Lim et al, 2021, p7(4)) it can be seen that there has been $40 billion revenue from the international students and tourism contributed $60.8 billion during 2019-2020. However, due to Covid19, there has been 99.5% fall in student arrival and 100% fall in the international tourism industry in Australia(Lim et al, 2021, p7(4)). Though there has been rise in international trade from the Australian market, however, massive fall in the net migration has resulted overall negative impact on the economy of Australia and the third-party people associated with the same. As other third-party case of the different developed and developing nations can be considered. Vaccination is also supposed to impact them as well through the means of international trade. Thus, as per the impact of the event third parties like tourism enthusiasts, students, and people connected with the tourism and education business in different state has also been impacted negatively.
Actions or behaviour triggered by the third party:
As the impact of the third party, case of the vaccination in different states can be mentioned. Based on the vaccination situation, of different state, Australian government is influenced to opening up of business in phased manner for normalising the economic activities. Besides, based on the microeconomic factors of the foreign market, Australian economy can also consider ramping up supply of goods and services in international market.
Conclusion and recommendations:
As per the above analysis it can be seen that the Australian economy has been going through a tough time and as the chosen newspaper demonstrated, another lockdown can lead to billion of dollar loss for the Australian economy. There has been sluggish vaccination program from the Australian government, however, prime minister focused on the providing vaccination at a steady state as the slower rate ensure higher efficacy. As per the analysis it can be seen that there are three vaccines available in the Australian market and the market has less competition due to the government control on the same. The market of vaccination is of monopoly in nature, however, due to its social need, government provide vaccination at free of cost. As the major factor that influence the supply and demand of the market, information availability of the consumers, availability of alternatives, taste and preference, resource price, availability of suppliers, time of supplying the vaccines has been considered. Through the economic event, from the analysis it has been found that there are third parties like tourism enthusiasts, students, and people connected with the tourism and education business in different state has also been impacted negatively.
Underpinning the finding of the study following, recommendations has been made:
- Government should enhance the information of Covid19 vaccination process and stages for increasing demand of the same
- Government should consider constant testing of the new vaccines to gain higher buyer power when it is purchasing vaccines from producers
- Government should encourage consumers to consider taking vaccines necessarily to survive from the Covid19 pandemic
- Government should introduce mass vaccination and mobile vaccination options to ramp up the vaccination pace
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