Melbourne lockdown set to cost our economy $10-12b
Melbourne’s six-week lockdown will deliver the state economy a devastating blow not seen since the Pyramid Building Society collapse in 1990.
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Melbourne’s six-week lockdown is tipped to blow a $10-12bn hole in the city’s once-thriving economy, delivering a hit worse than the Pyramid Building Society collapse in 1990.
An exclusive analysis for the Herald Sun shows Melbourne’s economy shrunk $4bn that year. The overall three-year recession wiped $14bn and it took six years for the city to recover.
In the 12 months to June 30 this year Melbourne’s economy shrank from $369bn to $358bn, according to SGS Economics and Planning partner Terry Rawnsley.
He predicts the six-week lockdown will cost another $10bn-12bn — a situation which is expected to worsen as ongoing restrictions are needed.
Pyramid’s demise was a disaster for Victorian mum-and-dad investors and retirees and came amid the collapse of several key financial institutions.
Melbourne unemployment remained above 11 per cent for three years, according to the SGS analysis, and it took until 2007 to get back to the 4.6 per cent unemployment rate that had existed before the recession began in 1990.
Since then Melbourne’s economy has grown every year, until now.
It comes as Victorian Treasurer Tim Pallas confirmed the budget would finish with a $7.5 billion deficit in 2019/20, as the state economy shrinks by 5.25 per cent in 2020.
He said it was “devastating” and a “very traumatic and dramatic economic event”.
“We draw comparisons with the Great Depression and they are not entirely over inflated,” Mr Pallas said.
The Treasurer also said there was no intention to slash and save in the near future: “The No 1 priority going forward will be jobs.”
Mr Rawnsley told the Herald Sun the recession three decades ago was “a very gradual slowdown”.
“Businesses would have slowly let people go and after a month or two or three, a business would have failed,” he said.
“Here we just hit a brick wall and the money has stopped flowing.
“The danger is if we keep going to this shutdown, open up, shutdown, open-up cycle, and JobKeeper is not going to help us anymore, then we will start to sort of test some of those highs of the recession of the early 90s.”
Mr Rawnsley said the collapse of financial institutions such as Pyramid harmed confidence and put Melbourne behind other cities in its recovery.
The second wave coronavirus lockdown would have a similar “second-round effect” on the economy, he said, particularly as international migration dried up with closed borders.
“The ability to attract people from other states with job opportunities is greatly reduced and hence you probably will see a bit more of an outflow when and if the borders open to the other states,” Mr Rawnsley said.
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Originally published as Melbourne lockdown set to cost our economy $10-12b