COVID-19 stringency measures impact the economy
The COVID-19 pandemic, combined with the imposition of restrictions on the free movement of people by governments around the world, has generated an unprecedented shock to the global economy. One way to quantify the stringency of governments' containment measures is via the Oxford COVID-19 Government Response Tracker, which aggregates each country's containment measures into a single stringency index.
As part of its March quarter GDP release, the UK’s Office of National Statistics published analysis on the relationship between the stringency index and growth in GDP. Figure 1 shows the resulting negative relationship, as countries with more stringent responses reported larger falls in GDP.
Figure 1: Stringency of government response and quarter-on-quarter growth in real GDP
(a) line of best fit relationship between stringency index and GDP growth
Note: Data current as at 28 May, 2020. GDP data from: https://data.oecd.org/gdp/quarterly-gdp.htm
The containment measures in Australia over the March quarter resulted in an average stringency index of 19.
Restrictions were placed on some international travel from the 1st February. As the pandemic progressed, containment measures expanded, eventually culminating at the end of the quarter with the closure of non-essential services, restrictions on gatherings, and several states declaring schools pupil-free.
Figure 2: Australia’s containment measures contribution to overall stringency
The biggest impacts observed across the Australian economy were:
Figure 3: Impacts across the three measures of GDP, quarterly movements
- Household spending on transport services fell 12.0% and on hotels, cafes and restaurants fell 9.2%, detracting a combined 0.6 percentage points from domestic final demand (-0.5%)
- Production of the accommodation and food services, and transport, postal and warehousing industries fell 7.5% and 4.9%, detracting 0.4 percentage points from GDP
- Commensurate falls were seen in the gross operating surplus of these industries, falling 14.2% and 6.8%