Melbourne lockdown kills hopes for September economic bounce

Melbourne's stage four lockdown has killed hopes of an economic rebound through the September quarter with warnings the growing number of state border closures will prolong the recession and hurt Australians' job prospects.

Economists with Westpac on Wednesday downgraded their GDP forecasts, saying it is unlikely the economy will grow through the three months to the end of September.

An expected September quarter bounce in the economy is now considered unlikely because of the stage four restrictions imposed on Melbourne.Credit:Janie Barrett

Treasury, most private sector analysts and the Reserve Bank, which updates its forecasts on Friday, had been expecting a strong economic bounce in the September quarter following a deep decline through the June quarter.

But Westpac chief economist Bill Evans said the lockdowns across Victoria, plus flow-on effects to the rest of the country, meant the recovery would be delayed.

He said the Victorian economy itself would now likely contract by 9 per cent in the September quarter, offsetting 2 per cent growth in NSW and a combined 3 per cent lift across Queensland, South Australia, Tasmania and the Northern Territory.

Even though there will be a sharp reduction in federal government support for the economy in the final quarter of the year, there should be an improvement as long as there were no more pandemic-related shutdowns.

"We expect that despite the fiscal cliff in the December quarter the economy will recover by 2.8 per cent in the December quarter under our core assumptions," he said.

"However, that will follow three quarters of near zero or negative growth leaving the economy operating still well below capacity by year's end."

The last time the Australian economy failed to grow through three consecutive quarters was during the 1982 recession during which unemployment peaked at 10.5 per cent.

The lower growth will translate into fewer jobs, with ANZ's economics team downgrading its jobs forecasts.

It had expected total employment to grow by 40,000 over August and September. The ANZ now believes total employment will fall by 50,000 over the same period.

Unemployment is likely to be pushed up for longer in the wake of the efforts by states to stop the spread of the coronavirus.Credit:Rhett Wyman

Senior economist Catherine Birch said while Victorian workers would be worst hit, there would be a flow-on impact to the rest of the country.

She said the reintroduction of mutual obligation measures for those on JobSeeker, including applying for four jobs a month, was too hasty given the lockdown in Victoria and other border closures.

"Given the lack of job opportunities on offer at the moment, not only in Victoria but elsewhere, we think the reinstatement of mutual obligations is too hasty," she said.

"Policy changes in the childcare sector also affect participation, particularly for women, as well as employment in the sector which is largely staffed by women."

The recession is continuing to batter consumers, with the Federal Chamber of Automotive Industries reporting just 72,505 new cars were sold during July. It was the lowest July result since 2002.

Through the first seven months of the year, the nation bought 514,920 vehicles, a 19.2 per cent drop on the same period of 2019.

Chamber chief executive Tony Weber said the car industry was facing tough conditions.

"The extended stage four restrictions which have now been invoked in Australia's second largest market, Victoria, will no doubt further challenge the industry during the coming months," he said.

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