Covid-19: $5bn blow ‘could blunt recovery’

Economists warn that further restrictions to control the new, more infectious delta variant of the Covid-19 virus may blunt the post-pandemic rebound.

Lockdowns have potentially already cost the national economy $5bn this year. Picture: AFP

The economic bill from this year’s rolling series of lockdowns has hit an estimated $5bn, with economists warning that further restrictions to control the new, more infectious delta variant of the Covid-19 virus may blunt the post-pandemic rebound.

As Sydneysiders prepare to enter a third week of lockdown from Friday, AMP Capital’s Shane Oliver estimated it would deliver another $1bn blow to the economy, bringing the projected hit over the three weeks to $3bn.

Perth’s four-day lockdown earlier this year would cost another $200m and Queensland’s three-day lockdown another $300m, Dr Oliver said. Adding in the $1.5bn estimated impact from Melbourne’s lockdown earlier in the year, the total hit to the economy this year was expected to be $5bn.

Deloitte Access Economics partner Chris Richardson said the economy and budget continued to run ahead of official forecasts, but added there were now “new risks” to the outlook.

“It’s not make-or-break as we stand, but certainly there is a chance the delta variant means more rolling lockdowns than the budget was factoring in,” Mr Richardson said.

The May federal budget assumed one short citywide lockdown in each month of 2021.

KPMG chief economist Brendan Rynne calculated a similar hit to the NSW economy from the Sydney restrictions of $150m a day. Previous “circuit-breaker” lockdowns had been followed by a near “instantaneous” recovery in activity as restrictions eased, Dr Rynne said, but at three weeks the Sydney lockdown was on the “cusp” of leaving a more lasting legacy in terms of changed behaviour and a slower rebound.

Dr Oliver said the lockdowns could knock about 0.1 percentage points off GDP growth in each of the June and September quarters, depending on how quickly activity could rebound. Over the year, growth could be more like 4.5 per cent, rather than the 5 per cent he currently anticipated.

The estimates come as Josh Frydenberg on Wednesday said he had rejected a written request from his NSW counterpart, Dominic Perrottet, to restart the JobKeeper program in the state.

NSW has already announced a support package which includes cash grants of between $5000 and $10,000 to eligible small businesses and sole traders, which have suffered revenue slumps of between 30 and 70 per cent. A similar grant scheme has also been offered to affected tourism and hospitality operators across the state as school holiday plans were axed.

In addition, some 42,510 Sydney workers who have lost income during the second week of the pandemic have so far received $20.2m via the commonwealth’s Covid disaster relief payment, ­figures from the Department of Social Services show.

Out of the claims granted, more than 5990 have been for individuals who have lost fewer than 20 hours of work and received $325, while the large bulk – more than 36,520 – have been for individuals who have lost more than 20 hours work and received the $500 grant, the DSS said.

But Australian Retailers Association chief executive Paul Zahra said the government support was not enough.

Sydney retailers now faced losing $3bn in lost trade over the three weeks of restrictions, Mr Zahra said, with small businesses in the CBD, in particular, in urgent need of further financial assistance. He said retailers were “grateful for the business support grants and payroll tax deferrals from the NSW government, (but) this doesn’t go far enough to compensate for the downturn businesses will suffer during a three-week lockdown”.

Mr Richardson said the state and federal authorities should be “war gaming” what type of further fiscal support could be offered should lockdowns become more frequent and longer-lasting over the balance of the year.

Economists also believe that while new strains of the virus increase the chance of lockdowns, Australian households and businesses have become more adept at navigating the restrictions, limiting the economic impact of restrictions in 2021 versus 2020.