The OECD has released its latest Economic Outlook. With unprecedented uncertainty due to the COVID-19 pandemic, the OECD has taken the unusual step of presenting two equally likely scenarios – one in which the virus is brought under control, and one in which a second global outbreak hits before the end of 2020.

If a second outbreak occurs triggering a return to lockdowns, world economic output is forecast to plummet 7.6% this year, before climbing back 2.8% in 2021. At its peak, unemployment in the OECD economies would be more than double the rate prior to the outbreaks, with little recovery in jobs next year.

If a second wave of infections is avoided, global economic activity is expected to fall by 6% in 2020 and OECD unemployment to climb to 9.2% from 5.4% in 2019.


In both scenarios, the recovery, after an initial, rapid resumption of activity, will take a long time to bring output back to pre-pandemic levels, and the crisis will leave long-lasting scars – a fall in living standards, high unemployment and weak investment. Job losses in the most affected sectors, such as tourism, hospitality and entertainment, will particularly hit low-skilled, young, and informal workers.

The report says government support to help people and business in the hard-hit sectors will need to evolve but to remain substantial.

On Australia

The report predicts in the double-hit scenario, Australia’s GDP could fall by 6.3% in 2020. Even in the absence of a second outbreak, GDP could fall by 5% in 2020.

There is ample fiscal space for Australia to support its economic recovery as needed. The scarring effects of unemployment – especially for young workers – should be alleviated through education and training, as well as enhancing job search programmes. Firms should continue to be supported, including through expanded loan guarantees, accompanied by expedited insolvency procedures. The Government should be considering further stimulus that may be needed once existing measures expire at the end of the third quarter 2020. Such support should focus on improving resilience and social and physical infrastructure, including strengthening the social safety net and investing in energy efficiency and social housing.

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