Federal Treasurer Josh Frydenberg is banking on Australia rebounding quickly from the economic impact of lockdowns in NSW and Victoria to avoid another recession this year.
But Mr Frydenberg also says it’s too early to tell if that will go to plan, warning that the path to recovery will be through high vaccination rates.
“Given the lockdowns across our two biggest state economies, NSW and Victoria, it won’t be surprising if the September quarter is negative,” he told The Australian in an interview on Tuesday.
“As for the December quarter, it’s 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.”
Australia could be plunged into another technical recession if the economy contracts for two consecutive quarters.
Mr Frydenberg noted the economy had bounced back strongly after last year’s coronavirus-induced recession.
“This demonstrates that when we successfully suppress the virus, the economy bounces back,” he said.
“The only pathway to a sustained recovery is through vaccination.”
Meanwhile, business is calling for a smarter approach to tackling the coronavirus, rather than the current response which has seen half the population in lockdown with negative consequences for the national economy.
South Australia is set to end its restrictions at midnight on Tuesday, while Victoria is yet to make a final decision as to whether it will do the same.
But NSW looks mired in lockdown beyond its scheduled ending on July 30, with daily new virus cases remaining well above 100 in recent days.
Research by consultants EY and commissioned by the Business Council of Australia shows the three state lockdowns are costing the economy $2.8 billion per week and affecting 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, 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,” 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.”
As it is, consumer confidence has taken a major hit during the recent spate of lockdowns.
The latest weekly ANZ-Roy Morgan consumer confidence index will be released on Tuesday morning.
Last week, the index tumbled 5.2 per cent, its sharpest weekly fall since March last year during the early stages of the pandemic.