A fresh COVID-19 lockdown in Victoria has taken the gloss off new upbeat economic figures for business investment which point to a solid growth result when the national accounts are released next week.
Acting Victorian Premier James Merlino announced a seven-day lockdown as 11 new cases were reported, bringing the cluster of infections to 26.
“The next seven days will be important, they will be difficult for Victorians,” Prime Minister Scott Morrison told parliament on Thursday.
The Australian Retailers Association said the lockdown is a devastating blow for consumer and business confidence, and again highlights the threat from COVID is far from over.
The association’s CEO Paul Zahra said the lockdown is set to cost more than one billion dollars in terms of lost retail trade.
“We support the Victorian government in their response to keep the community safe, but we can’t ignore the significant impact this lockdown will have on retailers, the Melbourne CBD and small businesses in particular,” he said.
As Mr Merlino was announcing the lockdown, the Australian Bureau of Statistics released figures showing new private capital expenditure rose 6.3 per cent to $31.5 billion in the March quarter, when economists had expected a 2.1 per cent increase.
Treasurer Josh Frydenberg told parliament this was the biggest quarterly increase in nine years.
“Manufacturing investments had the biggest jump for 16 years. This is the product of our policies,” he said.
Equipment, plant and machinery expenditure surged 9.1 per cent to $15.3 billion, a result that feeds directly into next Wednesday’s national accounts for the March quarter, which will contain the latest growth figures.
Buildings and structures expenditure rose by 3.8 per cent to $16.2 billion.
“The strength of the data confirms that there will be a marked pick-up in business investment in next week’s national accounts release,” BIS Oxford Economics chief economist Sarah Hunter said.
“The data is very likely to confirm that the recovery is well-entrenched, despite the ongoing risks of COVID-19 outbreaks.”
At this stage, and prior to a smattering of quarterly figures on Tuesday ahead of the national accounts, economists are predicting growth to be around one per cent in the March quarter.
“That means economic activity would be restored to where it was a year ago,” Commonwealth Securities chief economist Craig James said.
It will follow two consecutive quarters of above three per cent growth after the economy fell into a deep recession in the first half of 2020.
The ABS report also shows the latest estimate for expenditure for the whole of the 2020/21 financial year is now put at $124 billion, a 2.2 per cent increase on the previous estimate.
For 2021/22, expenditure is now seen at $113.6 billion, 7.9 per cent higher than previously forecast.
A separate ABS survey showed businesses reported stable trading conditions in May, with 78 per cent experiencing either no change or an increase in revenue, which was unchanged from April.
The report found just eight per cent expected revenue to fall in June, although the ABS stressed some businesses were still recovering from the effects of the COVID-19 pandemic.
One quarter reported that their cash on hand was lower than usual for this time of year.
The survey also found that since the end of March, 20 per cent of businesses had stopped accessing support measures such as wage subsidies, the renegotiation of property rent or lease arrangements and deferred loan repayments.
Of these, 23 per cent have been impacted to a “great extent”.