An extra 400,000 Australians could lose their jobs or be working zero hours by the end of the year as a result of Victoria’s second lockdown.
As the state recorded another 471 cases and eight deaths, Treasurer Josh Frydenberg told reporters on Thursday that between 250,000 and 400,000 extra workers would lose their jobs or be stood down by year’s end.
The grim forecast was part of a wider set of estimates released by Treasury to account for Victoria’s move into Stage 4 restrictions – prompting the federal government on Friday to pour another $15.4 billion into JobKeeper.
The stricter lockdown has effectively shut down all shops other than supermarkets in Victoria, and forced warehouses and construction sites to dramatically reduce staff.
Consequently, Treasury estimates GDP to fall by $12 billion in the September quarter and unemployment to rise to a peak of 10 per cent before the end of the year.
And the effective unemployment rate, which takes into account people who are working zero hours or have given up looking for work, will climb back into the “high 13s” after falling to 11.3 per cent in June.
Prime Minister Scott Morrison told reporters the first phase of Victoria’s lockdown was estimated to cost the national economy $3.3 billion, while the second phase was estimated to cost between $7 billion and $9 billion.
He said 80 per cent of that cost will be felt in Victoria, where tens of thousands of businesses will be forced to stand down staff, and 20 per cent would be felt elsewhere, via supply chain disruptions and hits to consumer confidence.
“This is a heavy blow,” Mr Morrison said.
The revised estimates come as other data already points to signs of economic deterioration in Victoria.
Data from the Australian Bureau of Statistics shows the number of payroll jobs in Victoria fell by 7.3 per cent between mid-June and mid-July – the worst of any state or territory.
And transaction data shows Victorians are already tightening their purse strings.
In the week ending July 31, credit and debit card spending in the state fell 6 per cent below where it was this time last year, according to Commonwealth Bank.
It was the only state besides the ACT to fall into negative territory that week, having been up 5 per cent the week before.
In an interview with The New Daily before the government announced another expansion to JobKeeper, independent economist Saul Eslake said the revised figures from Treasury suggest GDP growth will be negative in the September quarter – meaning Australia will suffer three consecutive quarters of negative growth.
If the lockdown costs the national economy $6 billion, GDP will decline by 0.1 per cent in the September quarter, Mr Eslake said.
If it costs $9 billion, it will fall by 0.5 per cent.
Government must spend even more
Asked whether the government should announce more support measures in light of Victoria’s lockdown, Mr Eslake said more stimulus was a given and only the type of stimulus needed was up for debate.
The Treasurer was right in saying tax cuts would put more money into people’s pockets, he said, but targeted cash handouts, infrastructure spending, and social housing projects would stimulate the economy more effectively, as the money would be spent rather than saved.
“The advantages of social housing programs are, apart from the fact that there’s a real need for them, that they are easy to turn up and down. They have a high labour content, most of the materials used in them are locally produced, and they can also be spread much more widely across the country than, say, a big-ticket infrastructure program like a toll road,” Mr Eslake said.
The government could also consider introducing a voucher scheme to boost tourism, whereby households are given time-sensitive coupons that can only be spent on certain tourism activities.
“It would be very effective in targeting assistance to where it’s most needed,” Mr Eslake said.
Market Economics director Stephen Koukoulas has also been a vocal advocate of more government spending.
He argued in a column this week that more stimulus was needed even before the Victorian lockdown, as previous measures had been “stingy and tied up in complex red tape”.
“[The stimulus] needs to be targeted at sectors in pain – tourism, education, the arts and related businesses. It needs to be directed at geographical areas where labour underutilisation is set to exceed 25 per cent,” Mr Koukoulas wrote.
“If this call for action sounds like a broken record, it is because economic records are being broken.”