Below is Deloitte Access Economics’ Weekly economic briefing with what sure looks like a double-dip recession to me:
Deloitte Access Economics’ latest Business Outlook suggests that while Delta strain outbreaks of COVID-19 and associated lockdowns have delayed Australia’s economic recovery, a strong post-pandemic recovery is still on the table.
The impact of lockdowns through mid-to-late 2021 has clearly caused great economic harm – we estimate, for example, that the economy may have shrunk by almost $18 billion in the September quarter. Many businesses have been unable to operate, those businesses’ employees have been unable to work, and confidence has taken a hit.
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But 2020 showed us that the Australian economy and labour market do have the capacity to bounce back. And this time around we have a weapon in our arsenal that we didn’t have in 2020 – vaccines. Vaccinations are the best possible stimulus for our ailing economy – and forecasts for everything, from wages to unemployment and hospitalisation to haircuts, depend on vaccinations.
That’s why, despite the current economic pain, we’re still forecasting a substantial return to growth. This is demonstrated in the chart below, following a forecast 3.5% hit to September quarter activity.
But the economic recovery won’t be even across the board. The regions and sectors hardest hit by the pandemic will have their recoveries delayed compared to the average.
The sectors most directly impacted by lockdowns (hospitality, arts & recreation, and transport) still bear the scars of 2020. They’re also the most exposed to tourism, delaying their ability for a full force recovery until international borders are open once again.
At a state and territory level, those that have remained most shielded from the pandemic thus far will continue to benefit in terms of their short-term economic growth. But they should also vaccinate fast, ready for the day Delta breaks down the door, or for when they open their borders to the rest of Australia and the world.
The September quarter of 2021 will likely be a horror for the Victorian, ACT, and especially New South Wales economies, dragging down 2021-22 economic growth. But once vaccination rates enable the lifting of lockdowns (and News South Wales has hit that button), they will all experience a return to growth.
The success thus far of shutting out COVID in Queensland, Western Australia, South Australia and Tasmania is forecast to see each of these states experience robust economic growth through 2021-22.
South Australia, for example, is benefiting on the ‘people power’ front, with more interstate migration going its way than it is used to seeing, and Queensland is also attracting interstate migrants. But it has a problem – not enough vaccines in arms. The Sunshine State’s great success in shutting out COVID is delivering big economic benefits, but those successes are fragile, and given its large tourism base, Queensland will remain at greater risk of the Delta blues until its vaccine hesitancy and complacency are finally overcome.