Swift economic policy has reduced COVID-19 fallout

Swift economic policy has reduced COVID-19 fallout


Decisive action from the world's economic policy makers has helped mitigate the financial fallout of the COVID-19 crisis.

ANZ chief economist Richard Yetsenga says economic policy makers have acted swiftly to curb the impact of COVID-19.

ANZ chief economist Richard Yetsenga says economic policy makers have acted swiftly to curb the impact of COVID-19.

THE INVESTMENT community has learnt from the lessons of the global financial crisis (GFC) and have acted swiftly to mitigate the impact of the COVID-19 pandemic.

"It is the largest policy intervention in history," said ANZ chief economist Richard Yetsenga at the Australian Grains Industry Conference late last month.

He said the policy-makers had not waited in putting in place huge stimulus packages to help protect economies.

"They have responded to the shutdowns and acted immediately, they did not wait until the data had come out which was what happened in the GFC."

"So far there has been three times the fiscal response to the GFC."

"They went hard and they went early, they were also influenced by the fact it is only expected to be a finite crisis, albeit it is dragging out longer than expected."

And Mr Yetsenga said it looked like it was helping.

"This is one of the largest downturns we've seen but there is resilience out there, the markets that you would expect would be signalling a terrible crisis aren't doing that."

Economic data has been weak in the wake of COVID-19 he said, however it has not been weaker than expected.

He said a Bloomberg index mapped economic surprise, when data came in worse than the market expected and this measure has been much stronger than during the GFC.

However, he said not all the data was rosy.

"The US economy has been hit hard and as the world's largest economy that's a big deal."

"They have had a large fiscal response, the budget deficit there may reach 20 per cent of GDP (gross domestic product), for an advanced economy that is unbelievable.

"The worrying thing is that fiscal response has not seen the US get the virus under control.

"At least in Australia, New Zealand, South Korea and other parts of Asia, the spending has seen somewhat of response and we can say we largely have the virus in check, there's been tangible benefit but in the US it is hard to see the tangible benefit."

He also said geopolitical tension had been strengthened by the crisis which made for further economic instability.

In terms of trade, he said the geopolitical tensions could be witnessed in disruptions.

"This is especially relevant for the grains industry, you take a look at China and the positions with trade restrictions, you've got Canada with canola, the US with soybeans and Australia with barley, all blocked by the Chinese government."

China is an increasingly important figure in the world economy in light of COVID-19.

"China's economy has risen to 80pc of the size of the US, up from 60pc.

"I spent years arguing China will take decades to catch the US and I have a little egg on my face, it is not there yet but it is gaining fast."

With the broad scale bans on movement and concerns about trade supply chains Mr Yetsenga forecast that countries would have an increased focus on core issues such as food security and self sufficiency.

"We've seen that already in the difference between soft and hard commodities.

"Wheat and rice prices have been quite strong, dairy been a surprise, the soft commodities as a complex are doing much better than the hard."


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