Melbourne CBD may suffer from a ‘lingering dose of the Delta blues’

Victoria’s economy made a “Houdini-like escape” from Covid earlier this year but experts warn next year’s recovery will look different.

Victoria’s economy is ready to come roaring back next year, according to a top economist, but the CBD may suffer from a “lingering dose of the Delta blues”.

The latest Deloitte Access Economics business outlook, by Chris Richardson, predicts the state’s economy will grow by 1.2 per cent in this financial year after shrinking by 1.8 per cent in the year to June 30.

But he is tipping growth of 7 per cent in 2022-23 – stronger than the national average – to $488bn, as the state reopens after another long lockdown.

“Case numbers may be very high, but the outlook for Victoria’s economy is a function of vaccinations, not cases,” Mr Richardson said.

“So prospects are better than most realise.

“As recently as three months ago, the state’s economy had performed a Houdini-like escape from the clutches of Covid.

“And 2022 should see a re-run of most of those same gains.

“As is true for the national economy, Victoria’s economy isn’t broken. It is merely locked down. And vaccinations hold the key to unlocking the state.”

Melbourne’s CBD has been hard hit by lockdowns. Picture: Andrew Henshaw

In the report, to be released on Monday, Mr Richardson warned that the state would face several challenges, including that its extended lockdown would “hurt exponentially more” as pent-up demand was “unable to make up for lengthier periods of loss”.

He said the future of commercial building would “take some time to get its bearings” during a delayed return to offices and shops in Melbourne’s CBD.

“Although spending should turn around fast once restrictions are loosened, Victorians could be hesitant – and perhaps more so than the national average – to return to bricks-and-mortar shopping and working from the office in a non-Covid-zero community,” Mr Richardson said.

Federal Treasurer Josh Frydenberg said that with NSW reopening on Monday, and vaccination rates rising rapidly, there was light at the end of the tunnel.

“We must learn to live with Covid and make lockdowns a thing of the past,” Mr Frydenberg said.

Opposition Treasury spokesman Jim Chalmers said Prime Minister Scott Morrison’s mistakes had bled billions of dollars a week from the national economy and forced more than 60 per cent of the country into lockdown.