Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

Australia: Cost of lockdowns is $17 billion and counting

Lockdowns to stop the spread of coronavirus have cost the economy at least $17 billion over the past two months with signs financial pressures are growing on Australians who are increasingly in need of government support.

As the 430,000 residents of the ACT were forced into a lockdown for the first time in more than a year and the 620,000 people of NSW’s Hunter region had their lockdown extended for another week, economists warned the financial cost of COVID-19 was growing.

AMP Capital chief economist Shane Oliver said with lockdowns growing in spread and length, the hit to GDP in the September quarter could be as much as 2.5 per cent. That would be about $17 billion in lost economic activity.

He said the Greater Sydney lockdown was costing about $1 billion a week while the various lockdowns across Victoria had cost at least $5 billion. Unemployment, now at 4.9 per cent, could reach 5.5 per cent with most of that increase in NSW.

“The extension of the Victorian lockdown for another week, the long Sydney lockdown and various shorter lockdowns in other states and regions is amplifying the economic hit to the current quarter,” Dr Oliver said.

“We’re certainly looking at a hit in the September quarter, a large one, but depending on when lockdowns come to an end then we should see a bounce in December.”

Dr Oliver also cautioned the June quarter was at risk of also showing negative growth, given some lockdowns occurred in June.

But he said while there was a financial cost from the lockdowns, they had delivered a major health benefit.

“We’ve avoided 48,000 deaths on a per capita basis compared to what’s gone on in other countries, so you have to keep all of this in perspective,” he said.

NAB chief economist Alan Oster said the bank’s customer data showed the recent lockdowns were knocking key parts of the economy, including those areas not directly affected by health orders.

He said over the past two months of lockdowns, there had been a slowdown of household consumption, which is down by 3 per cent since the start of the year. By contrast, in 2019 consumption was up by 20 per cent over the same period.

Retail spending is down 7 per cent since the start of this year while hospitality is down by more than 25 per cent.

“Pubs, restaurants, cafes and accommodation all continue to struggle,” he said.

Prime Minister Scott Morrison said there were almost 750,000 people across NSW who had received $1.7 billion in direct income support under the government’s COVID disaster assistance payment. Of those, 655,000 people were from the Greater Sydney area.

Separate research from ANZ on Thursday shows how lockdowns are now hurting the finances of many individuals.

It found Google inquiries for “government support” has now reached the highest level since the start of the pandemic last year. Searches for Centrelink and bankruptcy also increased over the past week.

ANZ economist Charlotte Heck-Parsch said lockdowns may also finally be affecting the property market.

She said house-buying related searches on Google had started trending down with queries down sharply in both NSW and Victoria.

Inquiries about mortgage rates, stamp duty and home loan calculators in both states have more than halved since peaking early in the year.