Coronavirus: $9bn and thousands of jobs at stake
Treasurer says the cost of Victoria’s stage-four restrictions will be higher than estimates and ‘felt beyond’ state borders.
Victoria’s six-week lockdown will wreak havoc on the nation’s economy, with up to $9bn potentially wiped from budget forecasts and hundreds of thousands of jobs lost ahead of the JobKeeper wage subsidy scheme scaling back in September.
Josh Frydenberg said the cost of Victoria’s stage-four restrictions would be higher than Treasury estimates and “felt beyond” state borders.
The Treasurer, who released the government’s economic and fiscal update on July 23, said Victoria’s new COVID-19 restrictions would put “an even greater burden on a state economy already under pressure”.
“This is why we are working through options for additional federal support to complement what the Victorian government has done and will need to do,” Mr Frydenberg said.
“With Victoria representing a quarter of the national economy, the economic impact of this second wave will be felt beyond its borders. Treasury had previously estimated a stage-three lockdown in Victoria for six weeks would reduce GDP by $3.3bn in the September quarter.”
Mr Frydenberg, who represents Kooyong in east Melbourne, said the “cost will now be higher” as the government on Sunday eased access to welfare payments through Services Australia. “How high will depend on the effectiveness of the new restrictions.
“There is simply so much at stake, as the speed and trajectory of the national economic recovery is dependent on our progress on the health front,” he said.
Scott Morrison and Premier Daniel Andrews have agreed in principle for the federal and Victorian governments to share the costs of any additional fiscal measures forced as a result of the dramatic increase in coronavirus restrictions.
The Prime Minister and Mr Andrews spoke on Sunday in “general terms” about the economic implications of the state’s stage-four restrictions.
Both agreed there was no immediate need for new funding because emergency measures, including JobKeeper, JobSeeker, small business support and state schemes, remained in place.
Amid calls from federal Labor for the government to review its decision to trim back JobKeeper from late September, The Australian understands the federal and Victorian governments would share additional funding if further assistance was required.
The immediate priority for commonwealth support is focused on the hundreds of public servants and 1400 Australian Defence Force personnel supporting Victoria’s COVID-19 tracing teams and monitoring quarantine.
Mr Andrews, who will outline the impact of his restrictions on business on Monday, said there were “national issues at play” because Victoria was home to Australia’s biggest container port and “what gets turned off here will have a direct impact right across the nation”.
The Morrison government on Sunday pledged to extend extra welfare support programs in the state, with Social Services Minister Anne Ruston confirming they would not impose new mutual obligation requirements, due to begin on Tuesday, on Victorian JobSeeker recipients.
When Mr Andrews first moved to reimpose stage-three restrictions on July 9, Mr Frydenberg said the reimposition of a Victorian lockdown could cost up to $1bn a week — a figure he first used in an address to parliament on May 12.
Citing Treasury estimates, Mr Frydenberg said the $1bn cost would be incurred from reimposing restrictions in Victoria “equivalent to those in place before the 8 May national cabinet meeting”.
It has now been more than three weeks since stage-three restrictions were introduced in metropolitan Melbourne and the Mitchell Shire, with stage-four restrictions to be extended in those areas until mid-September. Stage-three restrictions will apply to the rest of the state.
The Institute of Public Affairs on Sunday said it estimated the gross state product hit to the Victorian economy could be as high as $3.17bn a week.
The IPA estimate was based on New Zealand Reserve Bank figures, which forecast that during the country’s stage-four restrictions, its economic growth was 37 per cent lower than business as usual.
Deloitte Access Economics senior partner Chris Richardson said job losses were likely to be worse than previously thought, as the government economic update assumed Melbourne would have a six-week, stage-three lockdown.
“We’re now in a phase in which we’re going to see, compared to the forecasts in July, more jobs lost, unemployment higher and unemployment staying higher for longer,” he said.
“The economy will be weaker and the bits of economy expected to be weaker already will be the hardest hit.”
Mr Richardson said the budget update, forecasting economic growth of -3.75 per cent this year, had built-in some “wriggle room” but it was “clearly worse than that now”.
Opposition Treasury spokesman Jim Chalmers said given Victoria’s lockdown, the Morrison government would need to review changes to JobKeeper payments so they were “tailored to the economic conditions”.
“We think the rate should be tapered at some point but clearly the developments in the economy in the last couple of weeks since the budget was updated warrants a reconsideration of that,” he said.
IPA executive director John Roskam said “it is not clear that shutting down thousands of Victorian businesses is proportionate to the health risk”.
He called on Mr Morrison to “speak for all Australians and stop making excuses for Daniel Andrews’s failure”.
Additional reporting: Richard Ferguson
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