Business, economy fears mount as COVID cases soar

Melbourne businesses are bracing for an extension to the city’s six-week lockdown and a deeper economic slump.

Citi bank analyst Richard Sproules said uncertainty would be a critical influence on whether banks pay dividends. Picture: NCA NewsWire / Ian Currie

Melbourne businesses are bracing for an extension to the city’s six-week lockdown and a deeper economic slump as COVID-19 cases across the state continue to spike to record levels.

Prominent Melbourne businessman Graeme Samuel, who gave a series of speeches two months ago in which he said the authorities had handled the pandemic reasonably well and predictions of an 8 per cent un­employment rate had merit, said on Monday he had now revised his view.

“I said that — but only as long as the public recognised the implications of the virus and the possibility of a second wave; that the state government continued to handle the day-by-day control well; and there wasn’t the somewhat hyperbolic commentary about the virus,” Mr Samuel told The Australian.

“Unfortunately all three have since happened, so I think you will have that misery of higher unemployment and the complications that go with that.

“We will need to focus more on retraining and how to grow the economy.”

Mr Samuel, a former investment banker and head of the nation’s competition watchdog, said he wasn’t worried about the nation’s rising debt and deficit, saying a gross debt-to-GDP figure of 40 per cent was still low by world standards.

While the task of growing the economy would now be tougher, he expressed confidence that Victoria would rise to the challenge and was nearing its infection peak.

“But it might last through to September and potentially longer,” he said.

Power giant EnergyAustralia, which is based in Melbourne, said companies were having to reassess previous contingency plans given the realisation a second wave of the pandemic was likely to extend temporary working solutions.

“For a long time we’ve been looking at the fact we were going to be in this model for six months. But now Victoria has taken another turn back, which has been a wake up,” EnergyAustralia executive — energy Liz Westcott told The Australian.

Uncharted territory

“This is really uncharted territory and we’re not sure how long this is going to take. We need to be resilient, recognising it’s a long-term change to the way we operate but also something we can adjust to.”

The EnergyAustralia executive was reluctant to criticise any government decisions and said utilities would play a critical part as an essential service through any economic volatility. “If I spend too long trying to speculate about what went wrong that‘s always looking backwards. We’re trying to always look forwards,” Ms Westcott said.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra echoed Mr Samuel, saying it was unclear how long the lockdown would last but the rate of infection would be brought under control if Victorians stuck to wearing masks and observing social distancing.

“The Victorian chamber supports the state government in its efforts to get the health crisis under control,” Mr Guerra said.

“Only after doing so can we look at reopening businesses and local economies by lifting restrictions.”

Announcing 532 new coronavirus cases on Monday, Victorian Premier Daniel Andrews warned that high-risk industries such as abattoirs might have to be shut down.

The main driver of the higher numbers, he said, was people going to work while they were sick.

Prime Minister Scott Morrison told reporters that Victoria “still has a long way to go”.

“We are still seeing case numbers at elevated levels and … when you get community-based transmission, it does take some time to get that down,” the Prime Minister said.

Victoria accounts for about 24 per cent of GDP.

An update by the Victorian Treasury last week warned that pandemic represented the biggest shock to the state economy since the Great Depression. It forecast that real gross state product may fall by 5.25 per cent in calendar year 2020 and in the September quarter, Victoria’s unemployment rate could hit 9 per cent.

JPMorgan said mobility data for Victoria showed the state had recovered in May, with driving requests on Apple maps steadily increasing and a sharp decline in usage of the Public Transport Victoria app bottoming out.

Since the start of July, however, driving in Melbourne had dropped again, and the aversion to travelling on public transport had re-emerged.

Meanwhile, local stocks firmed on Monday despite the record number of cases in Victoria, with the S&P/ASX 200 index rising 20.2 points, or 0.3 per cent, to 6044.2. The index is only 112.1 points below its four-month high recorded last week.

Meanwhile, Citi bank analyst Richard Sproules said uncertainty would be a critical influence on whether banks pay dividends.

Additional reporting: Perry Williams and Lachlan Moffett Gray