Sydney, July 22 (Reuters) – In Australia’s largest city, construction has come to a standstill for the first time in living memory as a rise in COVID-19 cases puts Sydney under its most difficult blockade since from the beginning of the pandemic.
Traders are out of work, with a first blow to other sectors including retailers and coffee shops, as the Delta variant of the coronavirus obscures the outlook for Australia’s $ 1.5 trillion economy, one of the few to successfully navigate the pandemic in the year 2020.
Now, some analysts see the economy shrinking this quarter, the first downturn since June 2020, amid suggestions that Sydney may be stuck indefinitely. Treasury Josh Frydenberg agrees, saying in a television interview that the September quarter will probably “be a negative”. Read more
The sudden change in Australia’s fate brought about by the Delta variant comes as policymakers in other developed countries begin to have second thoughts about the rapid reopening of their economies. Read more
“I do not think everyone appreciates how contagious this species is and how it differs from past species,” said Gladys Berejiklian, Prime Minister for New South Wales, whose capital is Sydney.
Berejiklian, who controlled previous outbreaks of the virus without imposing widespread blockades, closed Sydney for the first time on June 26 and has since tightened restrictions banning construction activity, closing retail and urging employers to reinstate policies. strict work from home.
The construction sector accounts for about 9% of Australia’s annual output, while retail accounts for more than 4%.
“Delta has defeated every single jurisdiction in the world,” Berejiklian said, calling the variant a “mechanical game” and noting some levels of restrictions could remain in place until vaccination rates increase.
Economists, who have been quick to lower estimates for Australia’s economic growth, warn a longer stalemate will have dire consequences as NSW accounts for a third of the country’s output. Read more
They also think the central bank may be forced to reverse a decision made earlier this month to start shrinking monetary stimulus from September. Read more
“Developments are worrying because things have not moved in the desired direction on the COVID-19 front, especially in NSW,” said Gareth Aird, head of Australian economics for the Commonwealth Bank.
New South Wales reported 124 new cases of COVID-19 on Thursday, up from 110 the day before, a record for this year and the highest in 16 months despite weeks of blockage. Read more
“We can not bring down the scenario where the blockage continues indefinitely until the percentage of the vaccinated population reaches a level that policymakers consider acceptable to reopen the economy,” Aird added.
Externally dependent is an accumulated vaccination spread, with less than 12% of the population fully inoculated, along with repeated outbreaks of the virus in the community from quarantine hotels. Read more
The bleak outlook changes sharply with the success that Australia boasted just a few months ago, as the economy quickly retreated to pre-COVID levels after its first recession in three decades. Read more
In addition to the early success in curbing the virus, massive government support had helped last year, though this time, support payments are not as generous.
RISKS OF STAGFLATION
As a result, businesses and workers are increasingly frustrated with the constant blockages, again.
The national carrier Qantas (QAN.AX) this week warned its staff it could stay on payroll if blockages continue for long periods.
Australia’s second most populous state Victoria is in the fifth blockade and smaller South Australia also ordered its residents this week to stay home as cases of the Delta variant exploding like wildfires.
Electronics giant JB Hi-Fi (JBH.AX) this week announced its sales have suffered until July. Read more
The ANZ High Frequency Index, which combines a variety of restaurant mobility and booking data, is now in negative territory and at its lowest level since October 2020.
For smaller firms such as Sydney-based Ianotti Electricals, long delays mean thousands of dollars of lost business.
“I had to leave the bathroom and kitchen renovations in the middle of the street. There were new jobs we had to start as well, this is not happening,” said David Ianotti, whose father owns the business. “I’m doing some work like finishing paperwork, cleaning my van etc, but it’s all unpaid work.”
Australia is not just struggling with the Delta variant.
A resurgence of cases globally has hit sentiment in global stock markets and cast a shadow over rosy growth forecasts as more countries impose restrictions again. Read more
“The Delta variant could fuel concerns about stagflation, which is a terrible combination of slowing 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 greater risk for investors than inflation.”
Reporting by Swati Pandey; Edited by Sam Holmes and Kim Coghill
Our standards: Principles of Trust of Thomson Reuters.
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