NSW Lockdowns to Cost Economy $1bn Per Week

With 112 new cases of COVID-19 recorded today in NSW, the lockdowns will likely be extended. But how will this impact the economy? 

Today, NSW recorded 112 new cases of COVID-19, bringing the total number of active cases in the state to 664.

The latest outbreak has prompted NSW Premier Gladys Berejiklian to state that: 

“The length of the lockdown will depend on our ability to come together and to follow the health advice across the state.”

Now, all signs are pointing to an extension of New South Wales’ lockdown, with some speculating that the state may be in lockdown for a further four weeks. 

Epidemiologist Mike Toole told Sky News that “Melbourne took 37 days to reach 566 total cases, [which] Sydney reached in just 25 days on Sunday.”

Economic damage 

The lockdowns are already costing NSW roughly $1 billion per week, and if lockdowns are extended for a further four weeks, AMP Capital chief economist Shane Oliver predicts that the “economic cost[s] blow out to $7 billion and take longer to recover from.”

According to The West, JP Morgan has slashed its national economic growth forecast for the September quarter by 0.5 percentage points to 0.25 percent due to NSW’s closures and lockdowns.

The increasing likelihood of extended lockdowns has prompted the NSW Government to implement a NSW-specific version of the JobKeeper subsidy scheme to help struggling businesses during the restrictions, which is expected to be unveiled in the next few days.  

However, if Melbourne can serve as an example of the economic damage wrought by lockdowns, it looks like NSW’s economy may take quite a hit with these latest lockdowns and surges in cases. 

A study commissioned by the City of Melbourne found that “it will take four years for the CBD’s economy to recover to pre-pandemic levels.”

Housing Market 

The grim economic forecasts surrounding New South Wales due to the latest COVID-19 outbreaks and lockdowns are spilling over to the property market, with Sydney’s auction volumes dropping by 17 percent over the weekend. 

However, auction clearance rates have remained strong at 76.5 per cent, despite a slight dip since late June which saw auction clearance rates of 82.6%.

Overall, Sydney’s housing market isn’t expected to take a significant hit from the latest COVID-19 outbreaks and lockdowns, as CoreLogic’s recent report speculates: 

“[Sydney’s] clearance rate is likely to be buoyed by a higher portion of properties selling prior to auction, and a pivot to virtual auctions. With agents finding ways to navigate the auction market amid social distancing restrictions, the clearance rate is more likely to reflect market sentiment than be directly impacted by a shorter term lockdown.”

Moreover, as the NSW Government prepares to unveil a state-specific renewal of the JobKeeper program, and with the RBA’s recent reiteration that interest rates will stay at historic lows until 2024, there are a lot of factors which will help to shelter the NSW property market from free falling.