Treasury revises forecasts in wake of Melbourne lockdown

Just weeks after issuing an economic and fiscal update, Prime Minister Scott Morrison has confirmed that Treasury has revised its forecasts in response to stage 4 lockdown measures imposed in Victoria.

In media conference held on Thursday (6 August), the Prime Minister revealed that additional restrictions in Victoria are estimated to cost the real economy between $7 billion to $9 billion over the September quarter.

According to Mr Morrison, the Victorian economy is expected to bear 80 per cent of the cost ($6-7 billion), with the remainder representing a “preliminary estimate” on the broader impact on confidence in other states and territories, and “supply chain impacts” from industry shutdowns in Victoria. 

“The combined effect on GDP of the stage 3 and 4 Victorian restrictions through September quarter is expected to be in the order of $10-12 billion, contracting 2.5 per cent from quarterly real GDP growth,” he added.

Treasury also revised its forecast for the unemployment rate, from a peak of 9.25 per cent to 10 per cent.

The effective unemployment rate is also expected to hit the “high 13s”, with an increase in effective unemployment of between 250,000 to 400,000. 

“That is very concerning, that is very troubling, but it is not unexpected in these circumstances,” Mr Morrison said.

“These measures will have a very significant cost, and it will impact the recovery path. 

“But the task doesn’t change. We get on top of this issue in Victoria, we band together, and we make this work.”

He concluded: “We work together across the country to do the things we need to do to boost demand, encourage investment and rebuild our economy and go forward.”

[Related: Government confirms record-high budget deficit]