The lockdown in Greater Sydney began on 25 June and has been extended to at least the end of August. The loss in confidence from the start of the lockdown currently stands at -16.1 per cent for Sydney, -9.5 per cent for Melbourne and -10.4 per cent nationally.
Although the extent to which confidence has fallen is similar, the level of national confidence after five weeks of the Sydney lockdown is much higher than the lowest value reached during the Victoria lockdown.
ANZ Research thinks the key reason for this difference is the Victorian lockdown was imposed at a time when the economy had just started recovering after the huge shock of the country-wide lockdown.
In contrast the Sydney lockdown was imposed after the Australian economy had practically recovered on all fronts – and was even better on some, such as employment.
For the year to December, ANZ Research now expects GDP to rise 3.8 per cent compared with 5.0 per cent before the onset of the Sydney lockdown. ANZ Research has lifted the growth estimate for next year, however, as the economy recovers some of the lost output, with growth in the year to December 2022 now expected to be 4.5 per cent compared with 3.5 per cent previously.
Two key factors will mitigate the effects on the NSW and national labour markets. First, the fiscal support discussed above, including for JobSaver, which requires businesses to maintain their headcount. Second, labour hoarding is a common approach by businesses to avoid the costs and delays of rehiring once restrictions ease, particularly given reported difficulty finding labour and the record high job vacancy rate.
Felicity Emmett is Senior Economist and David Plank is Head of Australian Economics at ANZ