Australia’s economic rebound will be slower and patchier following the current lockdowns, compared to the speedy bouncebacks after previous lockdowns, a leading economist has said.
In a new note, Commonwealth Bank head of Australian economics Gareth Aird said the “consensus view” of a “very swift” economic rebound was overly optimistic.
“Economists have formed that view because economic activity snapped back very quickly over the past year each time a lockdown ended,” Aird said.
“But things will look very different in Greater Sydney and potentially other parts of Australia when the current lockdown is over.
“The economic reopening, particularly in NSW, will be very different to exiting previous lockdowns.”
Indeed, NAB’s latest prediction is that Australia will “likely see a rapid rebound as restrictions are removed”.
Here’s how Aird believes life in the next economic recovery will look different:
1. We’ll have to get used to high COVID-19 case numbers
Lockdowns won’t be lifted because there are no more new cases, Aird believes. Rather, restrictions will ease because the population will hit the target vaccination rate.
“For the first time Australia will experience living with COVID’,” he said.
“This is likely to mean that there will be a significant period of adjustment for households and businesses as the virus circulates within the community in large numbers and hospitalisations rise. It will mean that the economic recovery, at least initially, is a bumpy ride.”
Echoing Aird, AMP Capital chief economist Shane Oliver told Yahoo Finance he still predicts a “strong bounceback”, but agrees it will be “slowed a bit compared to last year”.
He also believes Australia will have to learn to “live with coronavirus”, meaning we’ll continue to see high case numbers every day.
“But providing the vaccines work like they are in Europe and the UK and high vaccinated US states in heading off serious illness, then we should be able to continue.”
Oliver expects the Reserve Bank will delay any rate hikes until 2024, unlike the 2023 that some observers were predicting.
2. People will feel hesitant to get outside
Australia’s economy was roaring back to life before the Delta variant of COVID-19 pushed half the country into snap lockdowns.
But NSW, often referred to as the powerhouse of Australia’s economy, has now been locked down for more than two months, and today announced 633 new locally acquired cases.
While we’ll see “pent-up demand … unleashed” for much of the population, many others will be cautious about being in the community again, Aird said.
3. CBDs will continue to struggle even after lockdown
CBD economies will also continue to be hamstrung with office workers likely to continue to working from home for a long while.
Lawmakers will have to dig deeper into government coffers, Aird suggested.
“More targeted fiscal support will be required to keep businesses afloat during this period.”
4. Not everyone will get their jobs back
And the jobs market, which was exceeding even pre-pandemic levels, will take time to recover.
“Not all workers stood down due to the current lockdowns will have a job to return to.”
Aird predicts the unemployment rate won’t get back down to the June 2021 low of 4.9 per cent until the middle of 2022.
“In short, we anticipate an uneven reopening of the economy, which means it will take time for economic momentum to build again.”