But it’s considered likely that the Federal Government will move to support businesses and that unemployment would only increase marginally.
The ANZ said the Delta variant had changed everything.
“This spread highlights the difficulty of containing the more transmissible Delta variant, and raises the issue of the very high risk of further contagion from Sydney into other cities and regions,’’ it said in a report this morning.
ANZ card data showed that restrictions were weighing heavily across the nation. Spending for the week to 24 July 2021 was the lowest since late April 2020, before JobKeeper and the JobSeeker supplement were first paid out.
The bank has forecast the economy would contract by 1.3 per cent in the September quarter while the CBA has tipped a much larger 2.7 per cent fall.
“A meaningful rebound in production is not expected until November. We forecast a lift in GDP of 1.9 per cent in the fourth quarter,’’ the CBA economics team said.
It follows research from Roy Morgan showing consumer confidence had taken a hit nationally because of the lockdowns. Brisbane’s fell 6.1 per cent in the findings released earlier this week, despite not being in lockdown.
That would be a significant blow to the cities economy, specifically its retail sector.
ANZ economists Arindam Chakraborty and David Plank said Sydney’s lockdown looked likely to be deeper and longer than initially estimated, and they anticipated tight restrictions to continue until at least the end of September.
That forecast indicates that they believe the four week extension to the current Sydney lockdown would not be the last of restrictions.
“As a result, we expect GDP to fall 1.3 per cent quarter-on-quarter in the third quarter, compared with our previous estimate of +0.4 per cent,’’ they said.
“The RBA is also expected to pitch in by delaying the reduction in weekly bond purchases announced at its July Board meeting until at least November.
“Labour hoarding and fiscal support will mitigate the effects on employment and the unemployment rate; hours worked and underemployment will bear the brunt of the lockdown.
“We expect the unemployment rate to fall to 4.5% in Q4, only marginally above our previous forecast.
The risks to the outlook are tilted to the downside. Given the much greater transmissibility of the Delta variant, the possibility of a longer lockdown in Sydney or further contagion into other states is significant.