Coronavirus: Lockdown puts Victoria in the slow lane to economic recovery

Victoria’s COVID restrictions cost jobs and smashed business confidence in July.

The construction sector will bear the brunt of the stage-four lockdown in Melbourne. Picture: Mark Stewart

Victoria’s COVID restrictions cost jobs and smashed business confidence in July, with economists warning of a two-speed economic recovery that risks leaving the state behind.

The number of Victorian payroll jobs fell by 1.5 per cent over the month to July 25, set against only a 0.1 per cent decline nationwide, the Australian Bureau of Statistics reported.

There were 6.7 per cent fewer payroll jobs in Victoria since March 14, when Australia recorded its 100th coronavirus case, compared with the national ­average decline of 4.5 per cent.

“The divergence between Victoria and the rest of Australia is becoming apparent,” ANZ senior economist Catherine Birch said.

As the Victorian second wave smashed hopes of a rapid recovery from the health crisis, and ahead of the imposition of the stage-four shutdown in Melbourne from August 5, corporate confidence also suffered a dramatic reversal following two months of rapid ­improvement from the record lows of April.

NAB’s widely followed business survey, conducted between July 22 and 31, showed national sentiment slumped 14 points from June to -14 points, while confidence among Victorian businesses collapsed by 22 points to -29.

The increasing pessimism was not restricted to Victoria. The NAB survey revealed firms in NSW also suffered a sharp loss of confidence amid fears the ­deteriorating health situation would spill across the border. NAB’s business confidence index for NSW dropped 27 points to -21.

The payroll data similarly showed job losses in NSW outpaced the national average, with a fall of 0.3 per cent over the month to July 25.

Citi chief economist Josh Williamson said that when trying to chart the potential path of the economic recovery from the worst downturn since the 1930s, the health outcomes would ­“determine everything”.

 

“There’s going to be this two-speed recovery, with states outside of Victoria recovering based on the reopening of their economies,” Mr Williamson said.

He said that the mood in NSW had likely improved in recent weeks as the number of new daily coronavirus cases had remained contained at between 10 and 20.

“Outside of Victoria, as long as we don’t see further restrictions, the other states should continue to accelerate their activity,” he said. “There’s nothing that Vic­toria produces or consumes that can’t be produced or consumed elsewhere. In the rest of the country, supply chains and logistics will adapt.”

The data revealed that Queensland, Western Australia and South Australia — states with zero or very low levels of transmission — look to be emerging from the COVID-19 recession at a quicker pace than NSW and Victoria. The number of payroll jobs in Queensland lifted 0.9 per cent in July, and by 1.1 per cent in WA, while SA recorded the strongest gain of 1.5 per cent.

The number of payroll jobs in WA now sits at just 2 per cent below the pre-COVID level.

Firms in those states were also more confident than the national average, the NAB survey showed.

WA businesses were the most optimistic in the country, as ­reflected with a business confidence index reading of 12 points — an increase of five from June.

The NAB survey showed Queensland firms registered a confidence reading of -5.7 points, while SA businesses recorded a reading of 4.5 points.

Mr Williamson said he now expected the Australian economy to contract by 1 per cent in September as a result of the Victorian restrictions — a full 4.5 percentage points below the pace ­expected prior to the second COVID wave.