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Vaccine delays threaten Australia’s economic recovery
Wins on the health front are leading to stronger economic outcomes, with the latest COVID-19 outbreak, coupled with a slow vaccine rollout, putting further pressure on Australia’s economic recovery.
Vaccine delays threaten Australia’s economic recovery
Wins on the health front are leading to stronger economic outcomes, with the latest COVID-19 outbreak, coupled with a slow vaccine rollout, putting further pressure on Australia’s economic recovery.
The original COVID-19 variant saw Australia’s 29 years of uninterrupted economic growth come to an abrupt end, with the economy nose-diving into a recession.
Off the back of a lack in business investments caused by lockdowns, Australia had its sharpest falls in GDP since the Great Depression.
Once the country reopened, Australia’s private business investments have grown since late 2020, and are now only 2.2 per cent below pre-COVID levels. This is the first time since the peak of the mining construction boom that business investments has grown for two consecutive quarters.
In what is shaping up as a déjà vu for Australia’s economic recovery, the Delta variant has so far seen three capital cities plunged into lockdown.
Economists are now warning that the September quarter will be negative, with a prolonged lockdown likely to push the economy into another recession.
In fact, the Treasurer, Josh Frydenberg, himself said as much on ABC TV, opining that Australia’s economic future depends on NSW.
With lockdowns in Australia’s largest two states, the economic impact is predicted to be quite damaging.
“My expectation is that the September quarter will be negative,” Mr Frydenberg said.
“But with respect to the December quarter, that does depend to a large extent on how successful New South Wales, our largest state economy, is in getting on top of this virus.”
While the Treasurer alluded to NSW being at fault for the current economic recovery, Deloitte Access Economics partner and report lead Stephen Smith said the vaccine rollout was the key to success.
“The path out of COVID-19 is tied to the pace of vaccinations. Despite an expected increase in vaccine supply, the Delta outbreak means that the problem is bigger and vaccine hesitancy means that the solution will be slower,” he said.
To help combat the spread of COVID-19, Prime Minister Scott Morrison has set new targets for the country’s vaccine rollout, despite missing various deadlines along the way.
Mr Smith pointed out that lockdowns were “kryptonite” for investment, with the business community wanting a clear path out of COVID-19 before committing to significant new projects.
“There are also some areas of the investment landscape which have become more challenged as a result of COVID, with many offices, shopping centres, airports and hotels suffering significantly lower utilisation, he said.
Mr Smith highlighted the construction industry has been affected directly due to its size and the impact that the COVID Delta variant has inflicted.
According to Deloitte, there are currently more than $185 billion worth of public infrastructure projects underway across Australia, with this figure forecast to reach $275 billion in 2023. This is an almost 50 per cent increase, with most of this gain said to come from projects that have yet to start construction.
“And then there are some supply-side challenges, particularly given the strength of public infrastructure investment, the high level of residential construction activity occurring and lack of skilled migration to Australia. This raises the question of whether the construction industry will be able to deliver projects on time and on budget,” he said.
Despite facing challenges, Deloitte is predicting Australia’s economy to bounce back in 2021, before accelerating in 2022.
“The outlook will depend on maintaining a high level of business confidence over the next year as well as the speed at which COVID restrictions are eased. The longer we appear to the world as a closed and risk-averse society, the more likely investment dollars will head to other countries instead,” Mr Smith concluded.
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