With Victoria following the state of New South Wales into lockdown, half of the country’s people are now trapped at home, and Australia’s recent economic progress is in jeopardy.
So far, Australia’s economic recovery in 2020 has been gratifying.Just a few days ago, the unemployment rate dropped to Very impressive 4.9%, This is the first time it has fallen below 5% since 2011. Australian Finance Minister Josh Frydenberg went out to brag about the results. And it’s fair enough.
But this number is in June. With delta pressure hitting our main economic centers-Sydney and Melbourne, July will be a different story for Australia.
The blockade in Sydney began on June 26, followed by Victoria on July 16.
As shown in the figure below, the total population of Victoria and Sydney is more than 12 million, accounting for nearly half of Australia’s population. The combined state of Victoria and Sydney also accounts for more than 48% of our economic output. Including the Greater Sydney area, the situation is even more severe.
It feels like 2020 is back. All the progress we have made—improved isolation, understanding how the virus spreads, and better contact tracing—still keeps us on par with the virus. At the same time, the progress we have not made yet — getting everyone vaccinated — suddenly became a big problem.
Due to the absence of JobKeeper and JobSeeker’s higher interest rates, this time the economic defense is not as good as 2020. These all ended in March, when most of us were optimistic that the virus had passed. Economic painkillers have failed, and now the pandemic is hurting us. Compared with last year, the frequency of corporate bankruptcies is higher-official data in the most recent week showed that the bankruptcy rate was 55% higher than in the same week of 2021.
Sydney and Melbourne will have to solve this problem themselves. Last year, we saw the extent to which the prolonged blockade inhibited Victoria’s economic activity. It is difficult for Victoria to beat the Alpha strain. Now both states are facing a more terrifying enemy: the delta.
Everyone and variant
The new coronavirus, well, it is getting more and more novel. It has mutated several times to become more dangerous, and the Delta strain is more transmissible and more deadly. Who knows if this will be the last worrying variant. Every time the genetic code in the virus replicates, there is a chance to produce new mutations. The more people infected, the more frequently it replicates.
The last dangerous variant comes from India, where the main outbreak occurred six months ago. Now Indonesia-the world’s fourth most populous country-has the worst outbreak in the world. We know everything about Alpha and Delta variants. Beta, Gamma and Kappa are also there. But before all this is over, how many Greek letters will we understand? When the World Health Organization chooses an alphabet with only 24 letters to represent the new variant, they may be overly optimistic.
There is some good news about the economic impact of the blockade. That is, the economy is actually very difficult to be completely suppressed.
If you prohibit in-person shopping, online shopping will flourish. If you prohibit drinking in bars, then drinking at home will rise. If it is difficult for you to go out, people will spend money to renovate their houses. If spending on services is challenging, people will buy goods. This impact is large enough that the Reserve Bank of Australia (RBA) has noticed:
RBA Deputy President Luci Ellis said in June of this year: “(It) goes beyond obvious alternatives, such as groceries from dining at a restaurant to cooking at home.”
“Sports equipment has replaced enclosed gyms, toys and games for organized children’s activities. As more and more time at home, people have renovated, redecorated and equipped the home office.”
Netflix won when the theater failed; Dan Murphy won when the bar lost. When the restaurant fails, Coles wins. If it is difficult to spend money during the lock-up period, then part of the expenditure—not all, but a part—occurs after the lock-in. For example, if the holiday in August is cancelled, the holiday in September will become extremely popular.
In other words, early statistics on the impact of the blockade may be slightly misleading. When you hear statistics about locks, keep this in mind.
As half of the country is blocked, the impact will be huge. But it may not be as big as it seems at first.