NSW’s lockdowns to flatten national GDP growth - July 2021
With cases continuing to rise, NSW’s latest wave of lockdowns across the country will wipe out up to $7bn in economic output with economists warming that September quarterly growth could fall to zero. These forecasts come as major areas of NSW shut down in response to the fast-spreading COVID-19 delta variant where the 3-week lockdown in Sydney will expect to lose $180 million each day in loss output or around $1 billion a week. This represents a 4.6% hit to Sydney’s economy and around 1.5% of national quarterly GDP. Prospects of an extended lockdown will extend Australia’s economic recovery time and slow progress in achieving the government’s target of 4.5% unemployment.
AMP Capital chief economist Shane Oliver said the combined closures through NSW, Western Australia and Queensland would detract at least $2.5bn. Sydney’s lockdown may contribute to greater consumer uncertainty and a major setback for the tourism industry doubt, especially ill-timed for the start of the new financial year. The lockdown also cuts through the school holidays, which would have been a very important recovery point for many small businesses. June employment data will probably show a slight rise in unemployment rate with a possible larger rise in July. Those who have lost their work are eligible for a $500 federal emergency payment but there exists a big risk to the labour market without a government backed wage subsidy scheme. Businesses have been thrown a $1.4bn lifeline including grants between $5000 and $10,000 for small businesses and payroll tax deferral for all employers.
However, Australia’s housing market has benefited from the pandemic, buoyed by ultra-low interest rates and government support measures like the HomeBuilder grants scheme. Nationwide house prices were 4 to 12% higher than they would have been, with housing units 13% above earlier estimates.
The widespread nature of the lockdowns and the heightened health risk could weigh down on both business and consumer confidence, especially given the absence of JobKeeper and the below-average vaccination rates.