Treasurer Josh Frydenberg warns the lockdowns in parts of NSW will have a significant impact on the national economy in terms of economic growth and potentially labour market outcomes.
It is widely expected the NSW government will need to extend the Greater Sydney lockdown to at least a fourth week given the number of coronavirus cases being reported.
The federal government, in partnership with its NSW counterparts, stepped in with an additional support package on Tuesday, which will form a template for future lengthy shutdowns across the country.
The $500 million a week cashflow boost and JobKeeper-style wage payments for workers whose hours have been reduced have been welcomed by businesses.
“We anticipated in the budget there would be further outbreaks and further lookdowns, but not of the lengthy duration we are seeing in NSW,” Mr Frydenberg told the ABC.
He said Treasury has estimated the NSW lockdown is costing the economy about $700 million a week.
Private sector economists believe it could be a much as $1 billion a week and are already marking down there economic forecasts for the September quarter.
“No one is dismissing the significant impact it will have on confidence and investment in terms of growth, and even potentially labour market outcomes,” the treasurer said.
The latest job figures for June are due on Thursday. While they won’t take into account the lengthy Sydney lockdown, they will include the impact of Melbourne’s most recent two-week shutdown.
New research shows the number of firms shutting up shop for the last time is on the rise, but the business landscape is still in a better position than the outlook a year ago when the economy was deep in recession.
The latest CreditorWatch business risk review shows the number of businesses going into administration rose by 23 per cent in the June quarter, but that is still 21 per cent lower compared to a year earlier.
“Businesses didn’t fall off a cliff as many feared at the start of the year,” CreditorWatch chief economist Harley Dale said.
But CreditorWatch CEO Patrick Coghlan warns the extended lockdown in Sydney is a stark reminder of the economic vulnerability of some industries.
“We’ll need to keep a close eye on these as the first half of Australia’s financial year progresses,” he said.