Josh Frydenberg appears less confident that a recession can be avoided as NSW’s virus lockdown looks set to drag on well beyond the end of the month as planned, with new daily infections remaining high and the death toll rising.
Last week the treasurer conceded the economy was likely to contract in the September quarter with NSW, Victoria and South Australia in lockdown, but was confident of an economic rebound in the December quarter.
But now, in an interview in The Australian, he says it is “too early to tell”.
“We have seen the economy rebound strongly from prior lockdowns and have good reason to expect it will do so again. But COVID has taught us we never know what’s around the corner,” he told The Australian newspaper.
Two consecutive negative quarters represent a technical recession.
With half the population in lockdown, consumer confidence has unsurprisingly tumbled further, a worry for those retailers that have managed to stay open.
The ANZ-Roy Morgan consumer confidence index dropped by a further 3.5 per cent in the past week, following on from the 5.2 per cent slump the previous week, to stand at its lowest level since November last year.
Confidence even fell heavily in Brisbane and Perth which are not in lockdown.
Research by consultants EY and commissioned by the Business Council of Australia shows the current three lockdowns are costing the economy $2.8 billion per week and impacting 1.6 million workers.
The NSW lockdown alone accounts for nearly two-thirds of this cost.
Furthermore, EY estimates that 100 days of lockdown restrictions at current levels would force the economy into reverse, taking it back to the lowest point of last year’s recession.
Given the highly infectious nature of the coronavirus Delta strain and the current state of vaccination rates, BCA says there needs to be a smarter approach to lockdowns.
“Nationally consistent approaches and predictability about how restrictions are triggered, enforced and ultimately lifted will improve confidence in the management of outbreaks, alleviating community and business confusion, uncertainty, and anxiety,” the BCA chief executive Jennifer Westacott says.
“We must accept there will be a cost in controlling the virus, but we can’t sit back and watch all of the hard-won economic gains of the last 12 months unravel.”
The council has released a set of guidelines it wants to see implemented.
These include consistent definitions to trigger lockdowns, which should be localised to affected areas, rather than shutting down the whole state.
At the same time, milestones around lockdown stages should be provided to remove the day-to-day guessing game around the rules and decisions.
It also wants a roadmap to reopening the economy, which includes a role for businesses to speed up the national vaccine rollout.
“Lockdowns have enormous economic and social costs and should be a last resort,” Ms Westacott said.
“But where they are used, we need to move from snap to smarter lockdowns.”