Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Australia's stunning economic recovery trips on Delta, vaccine snags

EconomyJul 22, 2021 01:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. View of a construction site for a train station on the Sydney Metro, Australia July 22, 2021. REUTERS/Sam Holmes 2/2

By Swati Pandey

SYDNEY (Reuters) - In Australia's largest city, construction has come to a standstill for the first time in living memory as a surge in COVID-19 cases puts Sydney under its toughest lockdown since the pandemic began.

Tradespeople are out of work, with a knock-on effect seen on other sectors including retailers and cafes, as the Delta variant of the coronavirus darkens the outlook for Australia's $1.5 trillion economy, one of the few to have successfully navigated the pandemic in 2020.

Now, some analysts see the economy shrinking this quarter, the first decline since June 2020, amid suggestions Sydney could remain in lockdown indefinitely. Treasurer Josh Frydenberg concurs, saying in a televised interview the September quarter will probably "be a negative."

The sudden change in Australia's fortunes brought on by the Delta variant comes as policymakers in other developed countries begin to have second thoughts about rapidly reopening their economies.

"I don't think everybody appreciates how contagious this strain is and how different it is from past strains," said Gladys Berejiklian, premier for New South Wales of which Sydney is the capital city.

Berejiklian, who controlled previous virus outbreaks without imposing widespread lockdowns, first locked up Sydney on June 26 and has since tightened restrictions banning construction activity, shutting down non-essential retail and urging employers to reinstate strict work-from-home policies.

The construction sector accounts for around 9% of Australia's annual output, while retail makes up for more than 4%.

"Delta has beaten every single jurisdiction in the world," Berejiklian said, calling the variant a "gamechanger" and flagging some level of restrictions could remain in place until the vaccination rate goes up.

Economists, who have been quick to downgrade estimates for Australia's economic growth, warn a longer lockdown will have dire consequences as NSW accounts for a third of the nation's output.

They also think the central bank could be forced to reverse a decision made earlier this month to begin tapering monetary stimulus from September.

"The developments are concerning because things have not moved in the desired direction on the COVID-19 front, particularly in NSW," said Gareth Aird, head of Australia economics for Commonwealth Bank.

New South Wales reported 124 new COVID-19 cases on Thursday, versus 110 a day earlier, a record for this year and the highest in 16 months despite weeks of lockdown.

"We cannot discount the scenario where the lockdown continues indefinitely until the proportion of the population vaccinated hits a level that policymakers deem acceptable to reopen the economy," Aird added.

Hanging heavy on outlook is a botched-up vaccination rollout, with under 12% of the population fully inoculated, together with recurrent leakage of the virus into the community from quarantine hotels.

The grim outlook sharply contrasts with the success Australia boasted only months ago, as the economy rebounded quickly to above pre-COVID levels after its first recession in three decades.

Apart from early success in curbing the virus, massive government support had helped last year, though this time around, support payments are not as generous.

STAGFLATION RISKS

As a result, businesses and workers are growing increasingly frustrated with the on-again, off-again lockdowns.

National carrier Qantas this week warned its staff may be stood down without pay if lockdowns continued for extended periods.

Australia's second-most populous state Victoria is in its fifth lockdown and smaller South Australia also ordered its residents this week to stay at home as cases of the Delta variant flare like wildfires.  

Electronics giant JB Hi-Fi this week warned its sales have suffered through July.

ANZ's High Frequency Indicator Index, which combines a variety of mobility data and restaurant bookings, is now in negative territory and at its lowest since October 2020.

For smaller firms such as Sydney-based Ianotti Electricals, the lengthy delays mean thousands of dollars of lost business.

"I've had to leave bathroom and kitchen renovations midway. There were new works we were supposed to start too, that's not happening," said David Ianotti, whose father owns the business. "I am doing some work like finishing up paperwork, cleaning my van etc but it's all unpaid work."

Australia is not battling the Delta variant alone.

A resurgence of cases globally has hit sentiment in world share markets and cast a shadow over rosy predictions for economic growth as more countries re-impose restrictions.

"The Delta variant could fuel worries about stagflation, which is a terrible combination of slowing economic growth and inflation at the same time," said Nancy Davis, a portfolio manager at Quadratic Capital Management, which has $3.2 billion in assets.

"Stagflation is an even bigger risk for investors than inflation."

Australia's stunning economic recovery trips on Delta, vaccine snags
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email