Crippling financial toll of Victoria's second coronavirus wave revealed
The economic impact of Victoria’s devastating second wave of coronavirus is totalling hundreds of millions of dollars every day, with experts warning the lockdown could have a catastrophic impact on business confidence as the state looks to recover from the pandemic.
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Victoria’s devastating second wave of coronavirus is costing the state between $300 million and $400 million a day in economic activity.
A leading economics and analytics firm has warned the current lockdown could have a catastrophic impact on business confidence as the state looks to recover from the pandemic.
SGS Economics and Planning economist Terry Rawnsley told the Sunday Herald Sun the state economy normally generated around $1 billion of income a day, but had been slashed by up to 45 per cent since the reintroduction of restrictions in mid-July.
SGS has previously provided high level advice to the state government.
Mr Rawnsley said the cost of the current lockdown could run as high as $25 billion.
“On a normal day the economy generates $1 billion of income, wages and profits,” he said.
“Stage four lockdown is knocking anything from 35 to 45 per cent off the economy every day.
“So we’re losing 300 to 400 million a day.
“All the income growth we had last year has been lost in a couple of months.”
The deadly second wave of the coronavirus in Victoria has been blamed on calamitous failures in the state’s hotel quarantine system.
The official inquiry into the bungled program heard earlier this month that 99 per cent of COVID-19 cases genomically tested in Victoria had been traced back to hotel quarantine.
Metro Melbourne has now been living with restrictions for 162 days and residents have been in hard lockdown for 29 days.
Mr Rawnsley said the lockdown had seen Victoria’s four key economical planks – international students, population growth, construction and tourism – “smashed to bits”.
And many businesses that had been forced to shut could struggle to reopen.
“It’s a pretty dire situation,” Mr Rawnsley said.
“There’s a tough road ahead. It’s a reset for the economy.”
Mr Rawnsley said the economic shock of the restrictions would be compounded by the ongoing cost of the COVID recession.
He said uncertainty about further potential lockdowns would have a huge impact on business confidence.
Sensis business confidence figures have revealed 38 per cent of Melbourne businesses were worried about their business over the next 12 months.
“If we come out of this and there’s another lockdown, who knows what that would do to small business holders, they might just close up shop.”
Mr Rawnsley has predicted local manufacturing could emerge as a key sector to Victoria’s recovery.
He said while property prices in inner-Melbourne had been smashed, middle ring suburbs would hold up better.
And while pay could be down by 20 per cent on average, cost of living pressures could ease because of a drop in inflation.
“But we really are in uncharted waters so its very hard to contextualise what this all means right now,” he said.
Treasurer Josh Frydenberg said: “Victorians should be under no illusion that on top of the heavy personal toll, the impact on the economy is severe.
“Treasury estimate that the combined effect of the initial stage three restrictions and the stage four restrictions through the September quarter is estimated to see a $10-12 billion or 2½ percentage point contraction from quarterly real GDP growth.
“In terms of employment, Treasury estimate that between 250,000 and 400,000 additional people will be effectively unemployed.
“These aren’t just numbers. These are our friends, colleagues, neighbours and family members.
“This a heavy blow to the economy and will not just be felt in Victoria but right across the country.”
It’s estimated Melbourne alone accounted for almost 40 per cent of national GDP growth in 2018-19 — more than any other Australian region.
The Sunday Herald Sun put the projections from SGS to the state government but a spokesman would only say: “This global pandemic is having a devastating impact on economies right around the world, and Victoria is not immune.
“Our economy is resilient and we will get through this, but we must drive cases down so we can open up and start rebuilding.”
The state government has spent more than $10 billion in response to pandemic, including $4 billion in economic support, $2 billion on supporting the health system, the $2.7 billion Building Works stimulus package and almost a billion on education initiatives.
Latest government modelling predicts unemployment could peak at 11 per cent in September quarter, a 2 per cent rise on forecasts released last month.
The Department of Treasury and Finance expects job losses to peak at 325,000.
And real gross state product is tipped to be 11 per cent lower than expected in the June Quarter, and a further 9 per cent lower in the September quarter.
About 40 per cent of jobs lost across the state by mid-April had been regained by June 25, but by the end of July this had reduced to 24 per cent.
The accommodation and food services and arts and recreation services industries were hit hardest.
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