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The longer run consequences of the pandemic will partly hinge on its impact on high productivity firms, and the ongoing process of labour reallocation from low to high productivity firms. While Schumpeter (1939) proposed that recessions can accelerate this process, the nature of the COVID-19 shock coupled with a policy response that prioritised preservation (over reallocation) raises questions about whether job reallocation remained productivity-enhancing. Using novel, near-real-time data for Australia, New Zealand and the United Kingdom, this paper shows that while labour turnover fell in response to the pandemic, job reallocation remained connected to firm productivity – that is, high productivity firms were more likely to expand and low productivity firms were more likely to contract. The pandemic coincided with a temporary strengthening of the reallocation-productivity link in Australia – but a weakening in New Zealand – which appears related to the design of job retention schemes. Finally, firms that intensively used Apps to manage their business were more resilient, even after controlling for productivity. Thus, while policy partly suppressed creative destruction, the nature of the shock – i.e. one where being online and able to operate remotely were key – favoured high productivity and tech-savvy firms, resulting in a reallocation of labour to such firms. The use of timely, novel data to investigate the allocative effects of the pandemic marks a significant advance, given that the seminal paper on productivity-enhancing reallocation during the Great Recession arrived some six years after Lehman Brothers collapsed.

We examine the cyclical relationship between labour market participation and economic activity in Australia. We find that the participation rate has a large and economically meaningful cyclical component. By cohort, the participation rates of young people, 25−54 year‐old females and older males are the most responsive to changes in economic conditions. If the participation rate did not adjust, expansions would be more inflationary; on the other hand, recessions would be more disinflationary and lead to larger increases in involuntary unemployment.

We develop a model of informal favor exchange within a social network where the cost of providing a favor is stochastic. The community has a norm, which specifies a cost threshold under which one should perform a favor if asked, as well as a punishment—exclusion from the network of the “noncompliers,” that is, of those who do not perform favors despite their cost being below the threshold, and those who refuse to punish nonperformers. We show that there always exists a cost threshold such that all agents participating in the favor exchange system receive strictly positive expected utility, and the system is a stable system. For systems involving stars and regular networks, we provide an ordering of the highest cost threshold supporting their stability. We also identify the conditions under which systems are efficient and show that, among all efficient systems, the one with the complete network provides the highest sum of expected utilities. An efficient system, however, need not be stable.

I construct a monthly index of economic uncertainty for Australia. Economic uncertainty rose to historically high levels during the financial crisis and remained elevated until late 2013. The index is: higher around recessions, elections, monetary policy surprises and some major events; tends to increase faster than it decreases; and is driven by both domestic and foreign factors. I use the index to assess how uncertainty affects the Australian economy. Consistent with the 'real options' channel of uncertainty, I find that it reduces investment and employment growth. Similarly, uncertainty raises the household saving ratio, consistent with the 'precautionary savings' channel. [ABSTRACT FROM AUTHOR]

High-quality assets play an important role as collateral for a wide range of transactions and activities in wholesale financial markets. Regulatory changes since the global financial crisis are increasing the demand for high-quality assets, thereby raising concerns about possible collateral shortages. This article attempts to quantify the ‘effective’ supply of collateral assets in Australia by using a measure of supply that adjusts outstanding issuance for two important features of the collateral market. One feature is that a large proportion of Australian high-quality assets is held by long-term investors that do not make these assets available for sale, loan or use in repurchase agreements. A second feature is the ability to re-use collateral assets, thereby allowing a single piece of collateral to meet multiple demands. Using a new survey that adjusts for these features, the current effective supply of Australian government debt for collateral purposes is estimated to be around $128 billion, comprising around $80 billion of active supply that is re-used on average 1.6 times. This amount would appear to be sufficient to support current demand for collateral.

We develop a model of favor exchange in a network setting where the cost of performing favors is stochastic. For any given favor exchange norm, we allow for the endogenous determination of the network structure via a link deletion game. We characterize the set of stable as well as equilibrium systems and show that these sets are identical. The most efficient network topology and favor exchange convention are generically shown to be not supported as equilibrium of the link deletion game. Our model provides a useful framework for understanding the topology of favor exchange networks. While the model exhibits positive externalities, its properties differ from the "information transmission" model à la Jackson and Wolinsky, as evidenced by the emergence of regular networks as opposed to star networks as stable and efficient network structures.