Victorian lockdown hits consumer confidence: Westpac survey

Consumer confidence has taken a knock from the Victorian lockdown, with the fear of further outbreaks spreading across state borders.

Aged care and disability care workers line up for their vaccine at the Melbourne Showgrounds. Picture : NCA NewsWire / Ian Currie

Victoria’s two-week lockdown will flatten economic growth in the only state which has yet to reach pre-pandemic levels of output, as Melbourne’s restrictions sent consumer confidence tumbling in early June.

With Victorian businesses counting the cost of the latest round of restrictions, Services Australia paid out $3.7m in Covid disaster relief payments on Tuesday, after approving 7868 of the 31,727 claims received on the first day of the federal support program for workers who lost income as a result of the second week of lockdown.

About four in five applicants had lost more than 20 hours of work, qualifying for the $500 handout, rather than the lesser $325 sum, a Services Australia spokeswoman said.

KPMG chief economist Brendan Rynne said the two weeks of lockdown would likely reduce Victoria’s output by around $1.8bn, or 1.5 per cent of gross state product.

That would result in the state’s economy stagnating over the June quarter, and leave it further behind the national recovery.

Dr Rynne said the tourism sector in particular would feel the lingering impact from holiday-makers being less willing to book ahead, which would lead to shorter, more opportunistic trips.

“That, on the whole, may add up to less being spent than otherwise would have been the case,” he said.

The potential price of suppressing the latest outbreak was also revealed in Westpac’s latest consumer sentiment survey, which showed a 5 per cent drop in the confidence gauge in early June, and an 8 per cent plunge in Victoria.

Westpac chief economist Bill Evans said the result was “almost certainly due to concerns around the two-week lockdown in Melbourne”.

 

Westpac’s sentiment measure for NSW, in contrast, fell by only a “meagre” 1.1 per cent, “highlighting the confidence the state has in its capacity to contain the virus,” Mr Evans said.

“While the fall in Victoria is to be expected, the significant declines elsewhere may be pointing to considerable insecurity in the small states with respect to their vulnerability to further outbreaks as well, in some cases, to their particular reliance on Victoria for tourism.”

EY chief economist Joanne Masters said that while there was a baseline expectation that spending by Victorians would follow the script of the past year and “snap back” after restrictions were eased, she warned that there was “always an element of uncertainty”.

“This is the first lockdown since the end of JobKeeper, and Melbourne may have more scarring from these types of events than in other cities,” Ms Masters said.

Restaurant and Catering Association chief executive Wes Lambert said ahead of the long weekend and less than a month ahead of school holidays that it was “vital” the ongoing trading restrictions be lifted as soon as possible.

“Every week that restrictions remain is a disaster for our sector, with rents and many fixed costs beating down the doors of nearly empty venues,” Mr Lambert said.

There was early evidence that the state’s regional areas – where there were no cases – had already bounced back.

Spending on ANZ cards was down “just” 10 per cent during the most recent weekend versus the weekend just before the most recent lockdown, ANZ economist Adelaide Timbrell said, or “almost identical to the change in spending across the rest of Australia during that time”.

She said this “quick bounce back” in the region was “in line with our view that short snap lockdowns do not have a scarring effect”.

Westpac’s sentiment index for June fell from 113 points to 107 pts early this month – still above the 100 mark, indicating optimists outnumbered pessimists. The NSW measure was 117 pts, versus 102 pts in Victoria.

But concerns were not restricted to the state, with the survey showing households were gloomier across the nation.

Confidence dropped 4 per cent in Queensland, 9 per cent in Western Australia, and 11 per cent in South Australia.

The consumer survey also showed Australians were increasingly gloomy about the prospect of buying a new home, with the “time to buy a dwelling” subindex falling a further 7 per cent in June – the fifth consecutive monthly drop.

At 96 pts, the measure was 11 per cent worse than a year before, and 27 per cent under the high of 132 pts in November.

After spending on goods boomed through the pandemic, Citi chief economist Josh Williamson said “the risk is that lockdowns could limit the degree of rotation towards services spending throughout the year”.