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Prime Minister warns of ‘heavy blow’ to economy in September quarter

Industrial Relations Minister Michaelia Cash said both sides should work collaboratively with the independent industrial regulator to find solutions where necessary.

Through the first half of 2020, the economy suffered its deepest contraction since the Great Depression due to lockdowns across the country. Since then it has rebounded strongly while unemployment has fallen to a 10-year low of 4.9 per cent.

But there are already signs the most recent lockdowns will hit the economy.

Preliminary retail figures for June from the Australian Bureau of Statistics showed a 1.8 per cent drop, the biggest fall this year.

Victoria, which emerged from lockdown late in the month, showed a 3.5 per cent fall in retail sales while there was a 2 per cent drop in NSW. Queensland, which faced its own restrictions, had a 1.5 per cent fall.

This data precedes the lockdowns now affecting more than half of the country.

Mr Morrison said he had spoken to Reserve Bank governor Philip Lowe and they are aligned on the outlook that the impacts of the lockdowns will mainly affect the current September quarter.

“In the quarter that follows, should we continue to be on the path we’re on in increasing our resilience, then we can expect that to turnaround in the December quarter,” he said.

“The sights will open again and the economy will come back to life very, very quickly.”

CommSec senior economist Ryan Felsman said the country now faces a move from a “V-shaped” recovery, where a sharp contraction is followed by a quick rebound, to a “W-shaped” recovery with multiple sharp downturns and subsequent improvements.

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Commonwealth Bank, Westpac and AMP economists expect GDP to contract 0.7 per cent over the September quarter and for unemployment to lift. The total cost of the Victorian, South Australian and NSW lockdowns so far are expected to be at a cost of about $12 billion. The majority of economists expect a fast rebound before Christmas provided the lockdowns are not extended.

“With lockdowns extending in Sydney and Victoria alongside mobility curbs in South Australia, it’ll be interesting to observe whether businesses see the latest outbreaks as being transitory – preferring to retain workers by cutting hours rather than jobs,” Mr Felsman said.

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