Dire warning from economist as NSW economy loses $1 billion a week

It’s not just NSW that will be impacted with a knock on impact on all Aussies, according to a dire warning from a leading economist.

For every week of NSW’s current lockdown, $1 billion will be lost from Australia’s economy, a leading economist has warned.

If Greater Sydney’s lockdown ends this week, although that is looking increasingly unlikely, then the economy will take a $5 billion hit.

However, for every week after that, NSW will lose another billion dollars.

So $5 billion is really a best case scenario.

“We’ve got last year’s lockdown to work on, we’ve got the Victorian lockdown to work on as a rough guide for Sydney,” Shane Oliver, head of investment strategy at AMP Capital, told news.com.au.

“If you knock a billion (dollars) a week off NSW, you knock off a billion off the national economy at the same time.”

His dire warning comes as NSW recorded 112 locally acquired coronavirus cases on Monday, which was the first time the state recorded triple digits in a single day since April 4, 2020.

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Forced closure of businesses is losing the country $1 billion in GDP a week. Picture: NCA NewsWire/Nikki Short

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Around the same time as NSW went into lockdown in late June, parts of the Northern Territory, Western Australia and Queensland went into four-day snap lockdowns.

Mr Oliver estimates this took a $500 million chunk out of the national economy.

Victoria’s two-week lockdown that started in early June was much worse, costing Aussies $1.5 billion.

That, combined with the three-week Sydney lockdown, will amount to $5 billion lost.

He said snap lockdowns never hurt the economy too badly, which is why economist only predicted a $500 million hit across the lockdowns of three states.

“When you have a short lockdown, economic activity is generally delayed,” Mr Oliver explained.

“We don’t notice it as much because people save up spending and it pops out the other side of lockdown.”

Long lockdowns are much worse on the economy than snap ones.

However, an extended lockdown will be “damaging”, especially for Australia’s most economically prosperous city.

‘The question becomes how quickly we recover at the end. We know they (economies) bounce back pretty quickly,” he said.

“(But) as it drags on, then more and more businesses come under pressure. When they come under pressure, they often have to lay people off.”

He’s particularly concerned because unlike Victoria’s four-month lockdown last year, NSW currently doesn’t have the added support of JobKeeper.

However, Prime Minister Scott Morrison is preparing to give NSW new cash boosts to help them last during the current lockdown.

Empty roads on the northern side of The Sydney Harbour Bridge as Sydney residents comply with the Covid lockdown in NSW. Picture: Julian Andrews

Comparing NSW’s current lockdown with Victoria’s extended one

Victoria’s extended lockdown from July 7 to October 26, 2020, went for 16 weeks, which was 112 days, or nearly four months.

It cost the economy a whopping $16 billion – $1 billion for every week stuck at home.

Unlike NSW, Victoria only locked down after getting to nearly 200 local cases.

Their case numbers peaked at 723 in one day.

Mr Oliver hoped his prediction for this new lockdown was an “over-estimate”.

“The economic impact from a lockdown now may not be as much as last year. There’s less uncertainty,” he said.

The Australian share market was down 0.5 per cent for the week with sharp falls in retailers, health, IT and financial shares as a result of the lockdown, he added.