Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Josh Frydenberg appears less confident that a recession can be avoided, as NSW’s virus lockdown looks set to drag on well beyond the end of the month after a record 172 new cases were recorded.
Last week the treasurer conceded the economy was likely to contract in the September quarter when NSW, Victoria and South Australia were all in lockdown, but was confident of an economic rebound in the December quarter.
But now, in an interview in The Australian newspaper on Tuesday, he says it is “too early to tell”.
“We have seen the economy rebound strongly from prior lockdowns and have good reason to expect it will do so again. But COVID has taught us we never know what’s around the corner,” he said.
Two consecutive negative quarters represent a technical recession.
Labor’s finance spokeswoman Katy Gallagher says there is a massive cost to the failure of vaccination and quarantine by the Morrison government.
“Whether that translates into a negative quarter down the track, time will tell,” Senator Gallagher told ABC radio.
“But the reality now is what’s happening for people today and tomorrow and in Sydney, what’s going to happen over the next month for them and their incomes and their families.”
There was at least some reprieve to the negative outlook with both Victoria and South Australia announcing they are ending their lockdowns on Tuesday night as planned, with some restrictions remaining in place.
But given half the population was in lockdown, consumer confidence has unsurprisingly tumbled further, a worry for those retailers that have managed to stay open.
The ANZ-Roy Morgan consumer confidence index dropped by a further 3.5 per cent in the past week, following on from the 5.2 per cent slump the previous week, to stand at its lowest level since November last year.
Confidence even fell heavily in Brisbane and Perth, which are not in lockdown.
Research by consultants EY and commissioned by the Business Council of Australia shows the three lockdowns were costing the economy $2.8 billion per week and impacting 1.6 million workers.
The NSW lockdown alone accounts for nearly two-thirds of this cost.
Furthermore, EY estimated that if all three lockdowns had remained in place for 100 days it would have forced the economy into reverse, taking it back to the lowest point of last year’s recession.
Given the highly infectious nature of the coronavirus Delta strain and the current state of vaccination rates, BCA says there needs to be a smarter approach to lockdowns.
“We must accept there will be a cost in controlling the virus, but we can’t sit back and watch all of the hard-won economic gains of the last 12 months unravel,” the BCA chief executive Jennifer Westacott says.
The council has released a set of guidelines it wants to see implemented.
These include consistent definitions to trigger lockdowns, which should be localised to affected areas, rather than shutting down the whole state.
At the same time, milestones around lockdown stages should be provided to remove the day-to-day guessing game around the rules and decisions.
It also wants a roadmap to reopening the economy, which includes a role for businesses to speed up the national vaccine rollout.
“Lockdowns have enormous economic and social costs and should be a last resort,” Ms Westacott said.
“But where they are used, we need to move from snap to smarter lockdowns.”