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Australia Treasury: Confidence Boost Antidote To Bird Flu
Tuesday February 14, 11:16 PM EST
SYDNEY -(Dow Jones)- Economic policies that restore confidence and consumption, support business in the short-term and promote a quick return to work are likely to be the most effective in offsetting any adverse consequences of a bird flu pandemic, Australia's Treasury argues in a paper published Wednesday.
These measures wouldn't only include stimulating the economy through interest rate cuts but also through increases in discretionary government spending that would possibly further erode a budget position predicted to swing into deficit as a result of the pandemic.
The Treasury paper examines the potential effects on Australia's economy from a global outbreak of avian influenza amid fears that the disease which affects birds might eventually threaten human lives.
It estimates that Australia's economy could contract by more than 5% in the first year following an outbreak of a highly contagious pandemic.
Treasury economic modeling also expects Australia's budget position to move into a significant deficit even before increases in discretionary spending to stimulate economic demand.
So far only people with direct contact with infected birds appear to be at risk, but scientists and health officials are preparing for the consequences should the disease become transmissible between humans.
The Treasury paper says the potential for economic effects to add to disruption are an important part of the pandemic story.
"By extension, policies designed to alleviate negative economic effects are also an important complement to public health policies," the paper posted on the Treasury's Web site says.
Economic effects include shortages of labor and temporary business closures due to people getting sick and staying at home to avoid infection or look after infected family and friends.
Demand for exports will also fall if other countries are hit by the pandemic and some industries such as tourism and restaurants may virtually close down, the paper warns.
The likely dramatic reduction in demand would see prices for many products fall although some prices may rise in the very short-term if there is panic- buying.
If the supply of goods and services is restricted as firms shut down and the flow of imports is curtailed, then there may be upward pressure on prices.
Quickly establishing consumer and investor confidence is likely to be one of the important roles the government can play in offsetting the economic consequences of a pandemic, the Treasury paper says.
"Governments might also consider policies that help viable businesses through the worst of the pandemic, in particular those businesses such as restaurants, that are likely to be most severely affected by a pandemic," the paper says.
But it warns that expansionary fiscal and monetary polices will only be effective if they are accompanied by a range of other policy measures that maintain financial stability and promote business continuity.
-By Owen Brown, Dow Jones Newswires; 612 8235 2964;
owen.brown@dowjones.com
-Edited by Paul Dekkers
Tuesday February 14, 11:16 PM EST
SYDNEY -(Dow Jones)- Economic policies that restore confidence and consumption, support business in the short-term and promote a quick return to work are likely to be the most effective in offsetting any adverse consequences of a bird flu pandemic, Australia's Treasury argues in a paper published Wednesday.
These measures wouldn't only include stimulating the economy through interest rate cuts but also through increases in discretionary government spending that would possibly further erode a budget position predicted to swing into deficit as a result of the pandemic.
The Treasury paper examines the potential effects on Australia's economy from a global outbreak of avian influenza amid fears that the disease which affects birds might eventually threaten human lives.
It estimates that Australia's economy could contract by more than 5% in the first year following an outbreak of a highly contagious pandemic.
Treasury economic modeling also expects Australia's budget position to move into a significant deficit even before increases in discretionary spending to stimulate economic demand.
So far only people with direct contact with infected birds appear to be at risk, but scientists and health officials are preparing for the consequences should the disease become transmissible between humans.
The Treasury paper says the potential for economic effects to add to disruption are an important part of the pandemic story.
"By extension, policies designed to alleviate negative economic effects are also an important complement to public health policies," the paper posted on the Treasury's Web site says.
Economic effects include shortages of labor and temporary business closures due to people getting sick and staying at home to avoid infection or look after infected family and friends.
Demand for exports will also fall if other countries are hit by the pandemic and some industries such as tourism and restaurants may virtually close down, the paper warns.
The likely dramatic reduction in demand would see prices for many products fall although some prices may rise in the very short-term if there is panic- buying.
If the supply of goods and services is restricted as firms shut down and the flow of imports is curtailed, then there may be upward pressure on prices.
Quickly establishing consumer and investor confidence is likely to be one of the important roles the government can play in offsetting the economic consequences of a pandemic, the Treasury paper says.
"Governments might also consider policies that help viable businesses through the worst of the pandemic, in particular those businesses such as restaurants, that are likely to be most severely affected by a pandemic," the paper says.
But it warns that expansionary fiscal and monetary polices will only be effective if they are accompanied by a range of other policy measures that maintain financial stability and promote business continuity.
-By Owen Brown, Dow Jones Newswires; 612 8235 2964;
owen.brown@dowjones.com
-Edited by Paul Dekkers
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