Victoria warns of property crash as work dries up

Victorian property prices will fall by up to 9 per cent and 270,000 Victorians will lose their jobs, ­according to state modelling.

People queue up outside a Centrelink office in Melbourne on April 20. Picture: William West/AFP

Victorian property prices will fall by up to 9 per cent and 270,000 Victorians will lose their jobs, ­according to state Treasury modelling predicting the economic crisis caused by the coronavirus pandemic will be “devastating” and “unprecedented”.

The modelling, details of which were released by the Andrews government on Wednesday, predicts gross state product could decline by an “unprecedented” 14 per cent relative to previous forecasts, with property prices down by 9 per cent by the end of the year.

Unemployment is expected to peak at 11 per cent in the September quarter — more than double the March rate or 5.2 per cent — with as many as 270,000 jobs lost.

The modelling assumes restrictions to slow the spread of coronavirus remain in place for six months — amid talk of the relaxation of some rules as soon as next month — setting up a worst-case scenario the Andrews government will be hoping it can avoid.

“The economic impact of the coronavirus pandemic is far worse than the global financial crisis, and in the post-war era is only rivalled by the devastating recession of the early 1990s,” a government spokesman said.

“The new figures confirm the impact of coronavirus will get significantly worse before it gets better and the hard road to recovery will be longer than first expected.”

The modelling has been released ahead of an emergency sitting of state parliament on Thursday, where the Andrews government will seek to pass legislation allowing it to secure $24.5bn in emergency funding to address the COVID-19 crisis.

If all of the emergency fund is spent, state debt will increase to more than $70bn — up from less than $23bn in 2018-19 — in part due to the government’s decision ahead of the 2018 election to borrow an extra $25.6bn over 10 years to fund major infrastructure.

“Alongside support for workers and businesses, it’s expected the government’s big-build agenda will continue and form a significant part of the economic recovery,” the spokesman said.

Treasurer Tim Pallas said the modelling painted a “bleak” picture of the state’s economy, “unprecedented in our lifetimes”. “But in Victoria we have the capacity to help those who need it most and recover,” Mr Pallas said.

 “Following years of strong economic management, we are in the position to support businesses, workers and their families during this unprecedented time, and help them get through this crisis.”

Department of Treasury and Finance secretary David Martine said Victoria was facing economic challenges not seen for generations. The department’s modelling “lays bare the impacts the coronavirus pandemic will have on the Victorian economy”, he said.

“The modelling will enable the government to … deliver measures to support workers and businesses, as well as the state’s economic ­recovery after the pandemic.”