Victorian Covid-19 lockdown: Stay-at-home order a $1.3bn hit to national economy

Victoria’s seven-day lockdown will cost the ­national economy $1.3 billion and ‘devastate’ businesses.

The masks are back in Melbourne as the city faces a seven-day lockdown. Picture: Getty Images

Victoria’s “circuit breaker” seven-day lockdown will cost the ­national economy $1.3 billion and “devastate” businesses in the country’s second largest city.

The measures announced on Thursday to suppress the latest Covid-19 outbreak include forcing shops to move to click and collect, and cafes and restaurants to offer takeaway only.

Victorians will not be allowed to travel more than 5km from home for non-essential business, children will study from home, and private and public gatherings have been banned.

CBA head of Australian economics Gareth Aird said the ­restrictions were equivalent to stage-four orders imposed in ­Victoria last August, and were expected to slash economic activity in the state by about 15 per cent over the week.

The $1.3 billion implied hit to GDP did not include indirect ­effects, Mr Aird said, such as a reluctance to travel to and from Victoria once the lockdown was lifted.

As firms prepared for a fourth lockdown, national employer group Ai Group implored Victorian authorities to keep their ­response “proportionate and targeted”. “With no JobKeeper support available, the lockdown will have a major impact on businesses of all sizes,” Ai Group Victorian head Tim Piper said.

“It was very disappointing that no support measures for business were announced today, which ­reinforces the view of Victorian businesses that they are an afterthought in dealing with Covid.”

The Australian Retailers ­Association said the lockdown would have a “devastating” effect on the sector, and predicted $1 billion in lost sales through the week.

The hospitality industry faced a $200 million hit to revenue and the prospect of losing $60 million in spoiled produce, Restaurant and Catering Association chief executive Wes Lambert said.

Josh Frydenberg said “already $45.2 billion in economic support” had been provided to Victoria during the pandemic and more was flowing in the form of tax cuts to households and businesses.

“Victoria’s lockdown is a painful reminder we are still in the midst of a global pandemic,” he said.

Business Council chief executive Jennifer Westacott slammed Victoria’s repeated failures to manage the virus. “Once again the systems for managing this virus through tracking and tracing and quarantine have failed,” she said.

“This is a wake-up call to start taking the steps to better manage outbreaks and fast-track our ­vaccination rollout.”

Queensland and Western Australia have introduced a hard border with Victoria, and Tasmania has joined the Northern Territory in declaring Greater Melbourne a virus hotspot – the economic ­impact of which was impossible to model, Mr Aird said.

Mr Piper said “Victoria is ­already losing economically as businesses diversify their risk away from the state”.

Still, the total damage from a week’s lockdown was equivalent to only 0.1 per cent of national GDP – not enough to materially damage the recovery.

“At this stage, the risk is that the number of Covid cases goes up and then suddenly a week becomes longer,” Mr Aird said.

“We’re certainly not there at the moment. We’d need to see a sustained shutdown and a far greater number of Covid cases, and nobody would be assuming that, given what we’ve seen.”

He said his bank’s proprietary spending data showed a 20 per cent plunge in consumption during previous lockdowns of similar severity. The state’s September quarter economic output last year was 10 per cent below pre-pandemic levels, and stage-four restrictions did not apply for the entire three months.