Josh Frydenberg, Australia’s federal government treasurer, has admitted the second Victorian lockdown will slow down Australia’s post-COVID-19 economic recovery.
Speaking to Sabra Lane on ABC Radio’s AM program on July 8, Frydenberg admitted that the second lockdown “is a major challenge to economic recovery.”
“This is going to have an impact well beyond the Victorian border. It has already started to play out in consumer confidence numbers, that have been down in the last two weeks, and Victoria is about a quarter of the national economy,” said the Treasurer.
Victoria has returned to a 6-week lockdown after a growing outbreak of the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus was uncovered in Melbourne.
This second lockdown is estimated by treasury’s calculations to cost the Australian economy around $1 billion a week.
The treasurer said: “That will fall heavily on businesses.”
However, Frydenberg noted that economically Australia was in better shape than the government and the Reserve Bank had initially thought at the end of the nationwide lockdowns.
In a media statement released on July 7, the Reserve Bank’s governor for Monetary Policy Decision Phillip Lowe said economic conditions had stabilised recently and that the downturn has been less severe than earlier expected.
“While the total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely. There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country,” said Lowe.
Lower was cautious, though, noting that the speed and nature of Australia’s economic recovery remained highly unpredictable. He said there was uncertainty about the health situation and the strength of the future economy in many households and businesses.
This has resulted in people being cautious in their consumption and spending habits and investment plans.
Tax Cuts Brought Forward
Frydenberg signalled that the federal government was considering two measures to raise economic confidence in the country.
The government might bring forward previously legislated reductions in income tax for those earning between $45, 000 and $200,000 so that Australians will only pay a marginal rate of no more than 30 cents in the dollar.
“We do want to boost aggregate demand, boost consumption, put more money in people’s pockets, and that is one way to do it,” said Frydenburg.
He also noted that there would be a further phase of income support after the end of programs like “JobSeeker” which will be “targeted, temporary, and designed to help the people who need it most.”
The federal government recognised that there will be some sectors of the economy that will be slower to recover than others, especially in Victoria.
“But we’re all in this together, and what happens in Victoria, and the progress that we can make in containing the virus, will be to the nation’s benefit,” said the Treasurer.
The Treasurer will be delivering a “mini-budget” on July 23, to update Australia on the fiscal health of the nation.