Lockdowns with no end in sight have the potential to plunge Australia into another recession as governments struggle to contain the highly contagious Delta tribe.
Restrictions in Sydney, Melbourne and Adelaide are already costing an estimated $2.1 billion a week.
Treasury and major banks predict the economy will contract in the September quarter as a result of forced store closures in July, August and September in Australia’s two largest cities.
Should the lockdowns continue after September, there is a chance that the economy will shrink again in the December quarter.
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Lockdowns with no end in sight have the potential to plunge Australia into another recession as health authorities struggle to contain the more contagious Delta strain. Restrictions in Sydney (pictured is George Street), Melbourne and Adelaide are already costing an estimated $2.1 billion a week
This would trigger a technical recession and see Australia suffer in consecutive calendar years for the first time since the early 1980s, following the downturn in early 2020 caused by the national Covid lockdowns.
Sunrise host David Koch asked treasurer Josh Frydenberg if there were any possibilities for lockdowns to push Australia into another recession.
Mr Frydenberg said the lockdowns in three cities cost the economy $2.1 billion a week – three times the $700 million a week estimate of Sydney’s previous June 26 lockdown, which allowed all shops except gyms to trade.
“We probably expect the September quarter to be negative,” he told Seven Network.
“Let’s see what happens in the coming weeks. It’s a big blow to have your two largest states of New South Wales and Victoria in lockdown.
Treasury estimates that having these three states with South Australia in lockdown costs about $300 million a day.
“Again, that will work out in many, many ways.”
Sunrise host David Koch (pictured left) asked treasurer Josh Frydenberg (right) if a recession was possible. Should the lockdowns continue after September, there is a chance that the economy could contract again in the December quarter, which covers October, November and the month of Christmas shopping
NSW Prime Minister Gladys Berejiklian could not say on Thursday how many days of zero community infection cases in Sydney would be needed before the lockdown is lifted, although it ends on July 30.
“I never want to delve into hypothetical facts,” she said.
“The numbers may continue to rise.”
NSW had the worst day of the Indian Delta tribe with 124 new cases of which 48 were infectious in the community.
University of South Australia epidemiologist Professor Adrian Esterman told Sunrise Sydney would likely be on lockdown until September as cases have not escalated after five weeks, and it would be at least another five weeks before community transmission closes. zero.
But he admitted that the virus would not go away completely, even if more effective vaccines were developed in the future.
This would set off a technical recession and see Australia suffer in consecutive calendar years for the first time since the early 1980s, following the early 2020 downturn caused by the national Covid lockdowns (pictured are dog walkers in Melbourne on Thursday)
While the unemployment rate in Australia fell to a 10-year low of 4.9 percent in June, the unemployment rate is set to rise in July.
New wage data from the Australian Bureau of Statistics for the two weeks to July 3 showed a national job decline of one per cent, with cities not in lockdown such as Brisbane also affected.
Westpac predicts that the Australian economy will contract 0.7 percent in the September quarter, while KPMG predicts a 0.5 percent contraction.
KPMG chief economist Brendan Rynne calculates that the lockdowns will cost $220 million a day in Sydney and $150 million a day in Melbourne.
But he said Australia was unlikely to fall into recession as spending resumed in the final three months of 2021.
NSW Prime Minister Gladys Berejiklian was unable to say on Thursday how many days of zero contagious Covid cases in Sydney would be needed before the lockdowns were lifted, even though they end on July 30
By September, enough doses of Pfizer vaccines are expected to have arrived in Australia to help the economy surpass its $10 billion economic output.
“The past 18 months, including the bushfires, have proven how resilient the Australian economy is to these external shocks,” Dr Rynne told the Daily Mail Australia.
“We bounce back relatively quickly. There is still a fundamental force in our labor market that is driving strong growth at the moment.’
Due to the pandemic, the federal government has already spent more than $300 billion on welfare measures as the Reserve Bank of Australia cut interest rates to a record low of 0.1 percent.
Australians in lockdown who lose 20 hours or more of work each week are eligible for $600 in federal government support, while those who lose eight to 20 hours of work can claim $375.
Between March 2020 and June 2021, the RBA gave banks $188 billion in financing to provide low-cost home and business loans through the Term Funding Facility that expired just three weeks ago.
CommSec now predicts that the RBA will have to intervene again to keep home borrowers afloat, even though the banks still offer a 2 percent mortgage rate.