Economic impact from Victoria ‘severe’

Treasurer Josh Frydenberg has warned the impact on the economy from Victoria’s tough restrictions to combat the coronavirus pandemic will be severe and felt across the country.

New Treasury figures predict up to another 400,000 people could lose their jobs as a result of Victoria’s Stage Four lockdowns, pushing the national unemployment rate up to 10 per cent.

Just two weeks ago, and prior to Victoria ramping up its restrictions, Treasury had forecast the jobless rate to peak at 9.25 per cent this year. 

This brings the jobless forecast in line with the Reserve Bank’s latest forecast.

“Australians should be under no illusion that on top of the heavy personal toll, the impact on the economy will be severe,” Mr Frydenberg, who is a Victorian, told AAP.

Treasury also expects economic growth will be now slashed by up to $12 billion in the September quarter, rather than a previous forecast of a $3.3 billion contraction under Victoria’s Stage Three restrictions.

“Treasury has been clear that these estimates should be treated with caution given the high levels of uncertainty around the assumptions and the outlook more broadly,” Mr Frydenberg said.

Prime Minister Scott Morrison said these latest forecasts are a “heavy blow” but not unexpected.

Mr Morrison said the unemployment rate did not give the full story. 

He prefers to use the effective unemployment rate, which includes people who have lost their jobs, as well as people who are still in work but have had their hours reduced to zero.

“This effective rate of unemployment, which had fallen in the most recent numbers down to just over 11 per cent, heads north again back to where it had come down from, which is in the high 13s,” he said.

“So, that is very concerning.”

Mr Morrison hinted further stimulus could be forthcoming before the October 6 budget.

“The treasurer and I are considering some further issues around JobKeeper,” he said.

“We are making announcements constantly. The budget will be in October and that will be another significant, arguably the most significant, instalment in these announcements.”

Deputy Prime Minister Michael McCormack has not ruled out providing further assistance to the crippled aviation sector.

“We will continue to look at what is necessary at the time,” Mr McCormack told Sky News.

“That’s what we have done right the way through since February-March. We have made sure the assistance is available, not just for the airline industry but for the economy, and we will continue to do that.”

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