Delta to deliver a $20bn blow to the economy, says Treasury

Treasury secretary Steven Kennedy reveals his department’s work underpinning the plan.

Treasury secretary Steven Kennedy says staff from his department were seconded to the Department of Science, Industry, Energy and Resources to advise on assumptions around interest rates. Picture: Gary Ramage

The number of NSW workers receiving the Covid-19 disaster payment plunged by 356,000 after the state reached the 70 per cent ­vaccination threshold early in Oct­ober, as Treasury secretary Steven Kennedy said he was ­“expecting the transition away from ­emergency household and business support to continue smoothly”.

Appearing at a Senate estimates committee hearing on Wednesday, Dr Kennedy said Delta would deliver a $20bn blow to the economy over the September quarter, driving a contraction of “around 3 per cent” in national output – the second-worst result in the history of the data stretching back to 1959.

 

As the country opens back up and vaccination rates continue to climb, the Treasury boss said the economy and labour market were “expected to recover quickly”.

Dr Kennedy pointed to Treasury figures that showed that 356,000 recipients of the Covid disaster payment in NSW dropped off the scheme after the state reached the 70 per cent vaccination threshold that ­triggered affected workers to reapply for the scheme.

Close to 1.1 million NSW residents had received the special income support payment at one stage during the Delta lockdowns.

Dr Kennedy said the number of workers receiving the disaster payment in the ACT had also halved when the territory reached a 70 per cent vaccination rate, and he expected a similar result in Victoria when the numbers became available.

Treasury estimates that the federal and state governments have committed $23.7bn in direct support to businesses and indi­viduals during the Delta lockdowns.

Of the amount, $11.4bn has gone to businesses in a program that split the cost between the federal and state governments.

The remaining $12.3bn went to individuals, via the Covid disaster payment, who had lost work as a result of lockdowns. The lion’s share of both payments went to residents and firms based in NSW and Victoria.

Dr Kennedy said 57 per cent of the income support payments had been paid to those aged under 35 years, while 58 per cent of the total was given to the bottom 40 per cent of earners.

The parliamentary committee also heard the commonwealth had stopped its contribution to the business support payments in NSW when the state reached an 80 per cent vaccination rate last week, and to ACT businesses around the middle of the month when the territory’s residents reached that same level.

Treasury estimates the “effective” unemployment rate was about 9.5 per cent, Dr Kennedy said, against the official 4.6 per cent measured by the Australian Bureau of Statistics in September.

That “effective” jobless rate included the 450,000 people working zero hours as a result of the Delta lockdowns but who were judged to be still attached to ­employers, and another 280,000 who Treasury believes left employment but were expected to “re-engage with the workforce probably at the same time restrictions are lifted and come back to some of the industries” most ­affected by the health restrictions, such as retail and hospitality.

Dr Kennedy said he was confident that “these (jobs) numbers are going to move very rapidly from now as businesses reopen and people can get back to work”.