The COVID-19 lockdown is bleeding $4 billion a week from the economy, draining away wealth 12 times faster than the last recession in 1990. Treasurer Josh Frydenberg will on Tuesday explain why getting people back to work will combat the significant fall in economic activity.
Virus restrictions are bleeding $4 billion a week from the economy — draining wealth 12 times faster than the 1990 recession.
Treasurer Josh Frydenberg will on Tuesday use a National Press Club address to outline the need to get people “back into jobs and back into work” to combat the significant reduction in economic activity caused by soaring unemployment, a decline in productivity and plummeting consumption during the crisis.
“Some of the hardest hit sectors like retail and hospitality are among the biggest employers, accounting for more than two million employees between them,” he will say.
Coronavirus restrictions will wipe $50 billion from Australia’s economy by June, but the damage would be twice as bad if the country had followed a European-style full lockdown, according to Treasury’s latest calculations.
It is estimated if restrictions were increased in a similar way to the eight-week lockdown in parts of Europe, then the negative impact on Australia’s GDP would have reached 24 per cent — or $120 billion.
“This would have seen enormous stress on our financial system as a result of increased balance sheet impairments, widespread firm closures, higher unemployment and household debt,” Mr Frydenberg will say.
“This was the cliff we were standing on.”
The impact of social distancing restrictions, shut downs and the whopping $320 billion spend on rescue measures by the federal government is estimated to cause Australia’s GDP to fall by 10 to 12 per cent in the June quarter.
“Despite the toilet paper boom and the record increase in retail trade in March due to panic buying, overall consumption, according to NAB data, has fallen 19.5 per cent since the start of the year,” Mr Frydenberg will say.
In NSW the drop in consumption has been 20.4 per cent — slightly above the national average, but behind the falls in Victoria, ACT and Western Australia.
He will point to a five percentage point unemployment jump in the 1990s, which then took seven years to return to “pre-crisis” levels to highlight the need to get people back to work. “(In the 1990s) unemployment went up in the elevator, and went down by the stairs,” he will say.
But Mr Frydenberg will outline the “advantage” Australia’s success in suppressing the spread of COVID-19 has given the country as it moves into an economic recovery phase with agriculture, mining and construction adapting strongly.