Economists believe the first contraction in the national economy since the depths of the COVID-19 pandemic is increasingly likely after the NSW government further tightened lockdown restrictions at the weekend.
All non-essential retailing is now closed in Greater Sydney and the construction industry is shut down until July 30, the first time this latter measure has been imposed in NSW.
Adding to the economic woes, Victoria’s lockdown will also likely extend beyond its originally planned five days.
“We now have almost two-thirds of the national economy in lockdown … this is really going to hurt,” Australian Industry Group chief executive Innes Willox told Sky News on Monday.
“Lockdowns and border closures, they are the real economy stopper.”
But NSW Premier Gladys Berejiklian defended the decision on construction sites on Monday.
“Having the risk of thousands and thousands of people being mobile at the one time, many of them coming from communities that have had cases, was too big a risk,” she told reporters.
ANZ economists say it is now increasingly likely that the September quarter national accounts will show the economy in contraction.
It would be the first negative result since Australia plunged into its first recession in nearly three decades last June.
RBC Capital Markets chief economist Su-Lin Ong estimates the Greater Sydney construction shutdown over the next two weeks will be a further $1 billion drag on the economy.
Economists have estimated the twin lockdowns of Australia’s two biggest cities could cost the national economy between $7 billion and $10 billion.
Ms Ong said even assuming some sort of recovery in the latter stages of the September quarter, she is predicting growth to be 1.5 per cent weaker than earlier thought, resulting in an overall contraction of 0.6 per cent.