Australia’s employment rate and economic recovery will be dealt a major blow by lockdowns in Sydney and Melbourne.
The unemployment rate has fallen to 4.9 per cent but the latest lockdowns in NSW and Victoria are expected to stall the recovery in the labour market.
The latest job figures include a previous two-week lockdown in Victoria, which drove an increase in underemployment.
Business owners hit by restrictions in the country’s two biggest cities have warned they have no choice but to lay off staff.
Employment Minister Stuart Robert conceded the lockdowns would have an impact, but insisted it would be short-lived.
“Because structurally the economy is sound, as soon as lockdowns finish, the economy bounces back,” Mr Robert said on Friday.
“Yes to an impact, no to it being long term.”
Treasurer Josh Frydenberg said the NSW lockdown cost $100 million a day and the impact in Victoria was about the same.
Mr Frydenberg said the coronavirus restrictions would definitely set the economy back.
He is buoyed by the latest jobs figures, saying: “It does show the remarkable resilience of our economy not to mention our job market.”
But the treasurer has conceded they are unlikely to be the last lockdowns this year.
GDP growth forecasts cut
Economists are already cutting their growth forecasts for this year and the next, expecting the economy to stall through to Christmas and only pick up as more people get the jab.
The unemployment rate is at a 10-year low of 4.9 per cent but the numbers are masking underemployment.
Some 33 million fewer hours were worked across the economy last month, which included Victoria’s last snap lockdown.
“People can’t get enough hours, people are in insecure work,” Labor leader Anthony Albanese told AAP on Friday.
Prime Minister Scott Morrison has said many Australians have been “building up their balance sheets” over the past year, providing “a bit of a buffer” to get through lockdowns.
“The truth is that while some people are doing OK, an enormous section of the Australian population is falling behind and that’s the real concern,” Mr Albanese said.
NSW records 97 new local cases
“Casualisation is having a massive impact.”
Even before Melbourne went into another snap lockdown, some economists were predicting a negative GDP result for the September quarter.
There is also some risk that the style of stay-at-home orders relied on in Sydney will not get the case numbers back to zero, given the rapid transmission of the Delta variant.
“In this case, Sydney could be in some form of lockdown until vaccination rates are near herd immunity levels, which is unlikely until March 2022, at the earliest,” HSBC chief economist Paul Bloxham said.
He tips growth of 4.5 per cent this year, down from 5.1 per cent, and 2.4 per cent for 2022 (from 2.8 per cent).
On NSW Treasury’s estimates of each week of erasing $850 million from the economy, a six-week lockdown would knock one per cent off quarterly GDP.
A 16-week lockdown would take 0.7 per cent off annual GDP.
Retail trade takes a hit in NSW, Victoria
The Morrison government has delivered support for households and businesses, but on a smaller scale than the large programs of 2020.
St George Bank economist Matthew Bunny said the “JobKeeper lite” package would provide some relief and the economy was in good shape heading into the outbreak.
“Over the long term, particularly as vaccines are rolled out, we remain optimistic about the outlook,” St George’s Mr Bunny said.
But Australian Retailers Association chief executive Paul Zahra said another $1 billion worth of retail trade is at risk with Victoria entering a five-day lockdown, adding to $6 billion already lost in NSW and Melbourne.
“NSW and Victoria are the engine rooms of the national economy, and with Australia’s two largest states now in lockdown, our pandemic recovery is in a precarious position,” he said.
The economic predictions point to little upward pressure on wages, just as Reserve Bank Philip Lowe was hoping skills shortages and a tight labour market might boost pay packets.
Treasurer Josh Frydenberg said the government has provided very significant support across the country.
“As the virus evolves so does our response and we are obviously dealing in real time with very difficult situations with the new, more contagious, more dangerous strain of COVID,” he told Sky News.