The lockdowns in parts of NSW will have a significant impact on the national economy, Federal Treasurer Josh Frydenberg warns.
New research also shows confidence in NSW could fall further with the Greater Sydney lockdown now extended to the end of July, while a separate report found a growing number of Australians believe it will take more than a year for life to return to normality.
The federal government, in partnership with its NSW counterparts, stepped in with an additional support package on Tuesday 13 July, which will form a template for future lengthy shutdowns across the country.
“We anticipated in the budget there would be further outbreaks and further lockdowns, 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 the figure could be as much as $1 billion a week and are already marking down their 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 July Westpac-Melbourne Institute consumer sentiment index rose 1.5 per cent as strong gains in Victoria and Western Australia offset a steep 10.2 per cent drop in NSW, including a 13.6 per cent tumble in Sydney.
Despite this fall, Westpac chief economist Bill Evans notes that levels of confidence in NSW indicate optimists continue to outweigh pessimists.
“It seem likely that at the time of the survey (July 5-9) many respondents may have been expecting a short lockdown period,” Mr Evans said.
“That suggests confidence in Sydney and NSW could fall significantly further if lockdown measures are unsuccessful or slow to act in containing the outbreak.”
A separate survey by the Australian Bureau of Statistics found just over a quarter of Australian households believe it will take more than a year for life to return to some normality after the disruptions from the pandemic.
That compares with 14 per cent when asked last year, while one in six felt life would never return to normal.
Still, while the number of firms shutting up shop for the last time is on the rise, the business landscape is 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 chief executive 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.
By Colin Brinsden, AAP Economics and Business Correspondent in Canberra
