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Reserve Bank of Australia assistant governor Luci Ellis fears economy won’t bounce bank after COVID

Why Australia will suffer a second wave of economic destruction long after the Melbourne coronavirus lockdown ends – and it could be worse than the Great Depression

  • Reserve Bank fears COVID-19 worries will hurt economy after lockdown ends
  • Assistant governor Luci Ellis said social distancing would have consequences
  • She predicted Australians would be reluctant to spent as coronavirus contained
  • Westpac fearing deeper downturn in Victorian than the 1930s Great Depression 

Australia is set to suffer a second wave of economic destruction as paranoia about coronavirus lingers on long after the Melbourne lockdown ends – with a major bank fearing a steeper downturn than the 1930s Great Depression.

The Reserve Bank of Australia’s assistant governor Luci Ellis said businesses would suffer as many more people than usual continued to stay home even when they didn’t need to.

‘There are a number of reasons why activity is unlikely to bounce back completely after lockdowns end,’ she told an Australian Business Economists online luncheon.

Australia is set to suffer a second wave of economic destruction as paranoia about coronavirus lingers on long after the Melbourne lockdowns end. Pictured is a closed tourist shop in the city

‘Firstly, some activity restrictions usually remain even after the most stringent lockdown measures are lifted.’ 

The Reserve Bank of Australia's assistant governor Luci Ellis said businesses would suffer as many more people than usual continued to stay home even when they didn't need to

The Reserve Bank of Australia’s assistant governor Luci Ellis said businesses would suffer as many more people than usual continued to stay home even when they didn’t need to

The Westpac bank now fears Victoria will suffer an economic downturn that is even more severe than the 1930s Great Depression. 

Even when Melbourne’s coronavirus trading restrictions were lifted, Ms Ellis feared worries about catching COVID-19 would stop people from spending money, further exacerbating the economic downturn.

‘Secondly, some people continue to engage in some social distancing beyond what is mandated,’ she said.

‘Thirdly, and probably most importantly, the deficiency in demand and a general increase in uncertainty induces people and firms to be more cautious in their spending decisions. So demand remains weak for some time.’

Westpac is predicting Victoria’s stricter, stage four lockdown into next month will cause Victoria’s economy to shrink by nine per cent in the September quarter alone.

Even when these trading restrictions were lifted, Ms Ellis feared worries about catching COVID-19 would stop people from spending money, further exacerbating the economic downturn. Pictured is a woman wearing a mask on Collins Street in the city

Even when these trading restrictions were lifted, Ms Ellis feared worries about catching COVID-19 would stop people from spending money, further exacerbating the economic downturn. Pictured is a woman wearing a mask on Collins Street in the city

Put another way, the contraction in three months would be the equivalent to three whole years of gross state product.

Unemployment during June amid COVID-19

Australia’s unemployment rate climbed from a 19-year high of 7.1 per cent in May to 7.4 per cent in June – the highest since November 1998

Number without work climbed from 923,000 to a record-high 992,300

Close to a million people unemployed for the first time ever – surpassing 960,200 record set in December 1992

Unemployment increased even though 210,800 more people were employed as COVID-19 shutdowns eased

That was because the participation rate increased from 62.7 per cent to 64 per cent as more people looked for work

Source: Australian Bureau of Statistics labour force data for June 

Westpac, Australia’s second biggest bank, is forecasting a 16 per cent plunge in the Victorian economy in the June and September quarters – a level even more severe than the 1930s Great Depression.

In 1930 and 1931, Australia’s economy shrank by ten per cent in financial one year, Reserve Bank and Treasury data showed. 

Federal Treasury now fears the six-week ban on non-essential businesses in Melbourne will put 250,000 to 400,000 Victorians out of work.

The Reserve Bank of Australia is predicting Australia’s unemployment rate, now at a 22-year high of 7.4 per cent, will surge to ten per cent by Christmas – a level unseen since 1994.

As recently as May, the central bank had forecast the jobless level peaking at nine per cent. 

The federal government last month tightened the rules for JobKeeper wage subsidies of $1,500 a fortnight.

The Melbourne lockdowns have changed that with Prime Minister Scott Morrison on Thursday announcing that an extra 740,000 Victorians will be on JobKeeper by Christmas.

His  government is pumping another $15.6billion into the scheme in response to Melbourne’s draconian stage-four lockdown. 

To qualify for JobKeeper from 28 September, businesses will only need to show a 30 per cent drop in revenue in the September quarter compared to the same time last year.

Westpac is predicting Victoria's stricter, stage four lockdowns into next month will cause Victoria's economy to shrink by nine per cent in the September quarter alone. Put another way, the contraction in three months would be the equivalent to three whole years of gross state product. Pictured is a closed sigbn at McDonald's at Sandown in Melbourne's south-east

Westpac is predicting Victoria’s stricter, stage four lockdowns into next month will cause Victoria’s economy to shrink by nine per cent in the September quarter alone. Put another way, the contraction in three months would be the equivalent to three whole years of gross state product. Pictured is a closed sigbn at McDonald’s at Sandown in Melbourne’s south-east

Federal Treasury fears the six-week ban on non-essential businesses in Melbourne will put 250,000 to 400,000 Victorians out of work. Pictured is a graph showing Australia still have a much lower level of coronavirus cases compared with the United States

Federal Treasury fears the six-week ban on non-essential businesses in Melbourne will put 250,000 to 400,000 Victorians out of work. Pictured is a graph showing Australia still have a much lower level of coronavirus cases compared with the United States

What is open in Melbourne Stage 4 lockdown?

Supermarkets, bottle shops, petrol stations, pharmacies, post offices, banks

Retailers working onsite to fulfill online orders 

Hardware, building an garden supplies for trade

Specialist stationery for business use 

Motor vehicle parts for emergency repairs, mechanics

Locksmiths, laundry and dry cleaners, maternity supplies

Disability and health services and equipment, mobility devices 

Farms and commercial fishing

Vets, pounds and animal shelters

Supermarkets will stay open

Supermarkets will stay open

Construction of critical infrastructure and services to support those projects

Critical repairs to homes where required for emergency or safety

Cafes and restaurants for takeaway

Media 

Critical service call centres

Medicare

Law enforcement and courts for urgent matters

Prisons, facilities for parolees, adult parole board, youth justice facilities

Emergency services

Essential maintenance and manufacturing

FULL LIST 

What is closed in Melbourne Stage 4 lockdown?

Furniture wholesalers

Personal care including hairdressers

Car washes

Pubs, taverns, bars, brothels and prostitution services, clubs, nightclubs

Food courts, restaurants, cafes, etc 

Architectural, engineering and technical services

Travel and tour agencies 

Non-emergency call centre operations

Non-urgent elective surgery

Museums, parks and gardens, ski resorts

Gambling

Places of worship except what is required to stream services or provide soup kitchens and food banks 

Manufacturing of non-metallic mineral and fabricated metal products, furniture, wood, textile, leather fur, dressing knitted, clothing and footwear, domestic appliances

All office-based and professional businesses, except those delivering critical services, must work from home

OPERATING BUT LIMITED

Building sites of more than three storeys – 25 per cent of workforce

Less than three storeys- five workers on site at a time only

Meat processing – workers cut by a third

Shopping centres for access to permitted retail only

Public transport, ride share and taxis only to support access to permitted services for permitted workers

Thoroughbred, harness and greyhound racing with minimum number of essential participants to operate safely 

FULL LIST  

Read more at DailyMail.co.uk


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